3 Reasons It Could Be Time to Sell Seagate

By Jim Mueller and Andrew Tonner – Dec 21, 2012 at 5:30PM

NASDAQ: STX

Seagate Technology

This hard disk giant is a dividend favorite, but does the PC market slowdown spell dark days ahead?

In the video below, Motley Fool analysts Andrew Tonner and Jim Mueller discuss three reasons why it could be time to sell Seagate Technology (STX).

The first issue Jim sees is how generous the company is in its options and its stock-based compensation plan. Option dilution is significant with this company, and It spends a lot of cash flow keeping that in check and reducing its share count.

Second, there seems to be a global slowdown in demand for storage space with PCs, and even the cloud storage spaces have downward pressure. This has lead to a lot of short-term pressures.

The third potential reason to sell Seagate is the rise of solid-state drives. Hard disk technology is still very cheap, but solid state drives are getting very good. If Seagate can get into SSDs, this could create more upside for the company.

Andrew Tonner has no positions in the stocks mentioned above. Jim Mueller owns shares of Amazon.com and Western Digital and has the following options: long JAN 2014 $20 calls on Facebook. The Motley Fool owns shares of Amazon.com, Facebook, Fusion-io, and Western Digital and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Amazon.com and Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.