STEC Shares Crushed on Near-Term Outlook

• By the tickerspy.com Staff
• On 10:36 am EST, Wednesday November 4, 2009

A weaker-than-expected near-term outlook for STEC (NASDAQ: STEC - News) led shares to plunge by -30% on Wednesday.

STEC reported EPS in line with the 47-cent consensus and topped revenue expectations in the third quarter, however the company's outlook through early 2010 has investors dumping shares. The stock is off by -30% today after STEC said that its Q4 revenue should come in between $101 million and $103 million, less than the $106 million forecasted by analysts.

Accelerating the sell-off is a warning that EMC (NYSE: EMC - News) is carrying an inventory glut, suggesting that demand for STEC's solid state drives (SSDs) could be weaker than expected. Capstone Investments analyst Jeffrey Schreiner told Reuters, "We see the inventory adjustments impacting STEC beyond the first quarter of 2010."

It will be interesting to follow the Data Storage Stocks Index as solid state technology develops. Deutsche Bank maintained its Buy rating on STEC after the disappointing news, although it did cut its price target to $36 from $45. Oppenheimer also slashed its price target to $21 from $45. Both represent a significant premium to the stock's current value below $16.

Elsewhere in the sector, Quantum (NYSE: QTM - News) is soaring by 18% today. It is now up by more than 80% over the last month.

Isilon Systems (NASDAQ; ISLN) and 3PAR (NYSE: PAR - News) are both up by more than 2.5% for the day. Still, both are among the sector's worst performers over the past five sessions.

Meanwhile, Compellent Technologies (NYSE: CML - News) and Hutchinson Technology (NASDAQ: HTCH - News) have gained 8% or more for the period.

As of this writing the Data Storage Stocks Index is one of 15 most expensive Indexes by average P/E ratio with a multiple of 39.4x. It is also among tickerspy's 30 worst-performing Indexes in the last month, down by -5.5%.

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