Morgan Stanley downgraded STX to “equal weight” from “overweight”
Seagate Technology Holdings PLC (NASDAQ:STX) stock is down 4.9% to trade at $81.01 at last check, after Morgan Stanley downgraded the equity to “equal weight” from “overweight,” with a price-target cut to $88 from $118, citing rising inventory levels, lower corporate spending plans, and slowing cyclical demand. The firm called IT hardware the worst performing tech group, downgrading the sector to “cautious” from “in line.”
Today’s drop has STX breaking below the 200-day moving average for the first time since early November of 2020, after the trendline captured a pullback just last week. Still, the stock is up 30.5% year-to-date.
Shorts have been zeroing in on STX, with short interest rising nearly 11% in the last two reporting periods. Now, the 10.4 million shares sold short make up 4.6% of the security’s available float. In other words, it would take over a week to buy back these bearish bets, at STX’s average pace of trading.
The options pits have been much more pessimistic than usual, too. STX’s 10-day put/call volume ratio of 3.67 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 98% of readings from the past year, while its 50-day put/call volume ratio of 1.30 stands higher than 99% of readings. This means puts have been picked up at a much quicker rate than usual.
This bearishness is being echoed in today’s trading, with 3,437 puts across the tape so far — double the intraday average — compared to 1,936 calls. The weekly 10/8 82-strike put is the most popular, followed by the 85-strke put in the same weekly series, with positions being opened at the former.