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Goldman Downgrades Seagate

Goldman downgrades hard-drive manufacturer Seagate Technology (STX) to underperform.

Analyst Laura Conigliaro says she's seeing signs that the disk drive industry is beginning to decelerate, with 1" drives likely to show disappointing growth. She thinks it's likely earnings will come down.

Although the company's current operating margin is 12% (with new capacity coming on stream in 1", desktop, mobile, and enterprise), she thinks it's more realistic to view average margins and normalized earnings as the means of valuing stock.

Conigliaro notes two prior cycles and average trough-to-peak operating margins were 9% and is applying this to normalized earnings points to a potential downside to $15 to $16.50 for shares.

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