Seagate stock (NASDAQ:STX) fell 6.6% at noon ET on Wednesday after the company missed earnings expectations.

Analysts expected Seagate to earn $0.76 per share on $2.1 billion in revenue in the fiscal first quarter of 2023. However, Seagate reported a $0.48 profit per share and sales of slightly over $2 billion, which is good news.

Market Analysis of Seagate Stock?

The bad news is that Seagate’s $0.48-per-share “profit” was calculated using non-GAAP (adjusted) figures. Earnings per share were $0.14 as computed in accordance with generally accepted accounting standards (GAAP).

Seagate attributed the loss to “global economic uncertainty and broad-based client inventory adjustments” and said that its business worsened “in the later parts of the September quarter” – so things look to be getting worse, not better, as time passes.

Granted, management described this as an industry-wide issue, not one specific to Seagate. Indeed, despite surpassing earnings expectations last month, competitor Micron Technology warned of a significant reduction in profits in its own fiscal Q1. Investors will wait to see whether Western Digital’s report supports or denies this trend tomorrow. Seagate, for its part, isn’t sitting still, claiming that it has already taken “rapid and immediate initiatives to adjust to current market circumstances and boost long-term profitability.” Nonetheless, the velocity at which things have worsened is rather startling.

Seagate’s quarterly sales plunged 35.5%, its gross profit margin fell 700 basis points to 23.7%, and GAAP earnings per diluted share fell by an astounding 94%.

So, what Next for Seagate Stock?

Seagate didn’t even bother to forecast its GAAP profitability for the current quarter, claiming that “material events that may affect these metrics are beyond our control and/or cannot be reasonably expected.” But even the non-GAAP news is terrible.

Given the magnitude of the negative news, a 6% drop in Seagate’s share price Today seems to be an under-reaction. As the entire amount of harm becomes clear, I predict investors to continue dumping Seagate stock

Featured Image-  Megapixl @ Wolterk

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