Seagate and Western Digital shares will suffer from declining profit margins, according to Evercore ISI.

The firm lowered its rating to underperform from in line for Seagate shares and reduced its rating to in line from outperform for Western Digital's stock. Both companies sell hard drives and flash memory storage devices.

"With topline likely flattish at best, GMs [gross profit margin] heading lower, and worse than expected NAND [flash memory] pricing driving increased potential for cannibalization of HDDs [hard disk drives], we see risk to the downside for Seagate after an excellent run," analyst C.J. Muse said in a note to clients Tuesday. "With NAND pricing expected to decline more aggressively through 1H19 … we simply find it hard to see [Western Digital] shares working into year-end."

Seagate shares closed down 7.7 percent Tuesday, while Western Digital's stock fell 4.7 percent.

The analyst predicts average selling prices for NAND flash memory will fall by a "low double digit" percentage into first-half 2019. He cited similarities to the late 2014 to the early 2015 pricing cycle, which coincided with a steep decline in storage device demand.

As a result he lowered his price target for Seagate shares to $45 from $55. Muse also reduced his price target for Western Digital to $75 from $100.

Western Digital and Seagate did not immediately respond to requests for comment.