Western Digital Downgraded at Raymond James
Raymond James analysts downgraded Western Digital (NASDAQ:WDC) to Market Perform from Outperform, citing the company’s current valuation as the primary reason. The analysts noted that although the fundamentals in the HDD and NAND markets are expected to continue improving, Western Digital’s stock has already surpassed the firm’s price target and is now trading at eight times the previous peak earnings per share. The stock’s rally, the analysts suggest, already reflects a reasonable recovery in these markets.
Using a sum-of-the-parts (SOTP) valuation approach, which the analysts consider more appropriate considering the company’s upcoming business separation, they see less than 10% upside potential. This is based on the assumption that the HDD business will trade in line with its peers like Seagate Technology (STX), and the NAND business will trade at about a 50% discount to other memory peers on an enterprise value to sales (EV/S) basis.
The analysts pointed out that the pure-play NAND business is likely to be valued significantly lower than memory peers primarily involved in DRAM, due to the NAND sector's fragmented nature and limited benefits from generative AI technologies.
| Symbol | Price | %chg |
|---|---|---|
| 005070.KS | 134900 | -2.3 |
| 7751.T | 4480 | 1.72 |
| 2382.TW | 322.5 | -0.16 |
| AXIO.JK | 175 | 0 |
Western Digital Shares Drop 3% Despite Q2 Beat
Western Digital (NASDAQ:WDC) delivered its fiscal second-quarter results on Thursday, outperforming analysts' expectations despite experiencing a decrease in margins. However, following the report, Western Digital shares saw a more than 3% decline in pre-market today.
The company reported a loss per share of $0.69 on revenue of $3.03 billion. This result was more favorable than the loss of $1.13 on revenue of $2.99 billion that analysts had predicted.
The company's cloud revenue decreased by 13% in Q2 compared to the same period last year, primarily due to a reduction in eSSD bit shipments. In contrast, revenue in the client and consumer segments saw an increase of 3% and 6%, respectively.
Looking ahead to fiscal Q3, Western Digital expects adjusted EPS to range from -$0.10 to $0.20 on revenue between $3.20 billion and $3.40 billion. This forecast surpasses analyst predictions of a $0.50 loss on revenue of $3.09 billion.
Western Digital Stock Jumps 13% Following Q1 Earnings
Western Digital (NASDAQ:WDC) shares rose nearly 13% in pre-market today after beating quarterly earnings expectations. They reported a Q1 loss of $1.76 per share, which is $0.15 better than the anticipated $1.91 loss, and revenue was $2.75 billion, surpassing the expected $2.66 billion.
While revenue increased 3% quarter-over-quarter due to 11% and 14% rises in Client and Consumer revenue respectively, Cloud revenue fell 12% quarter-over-quarter.
For Q2/24, the company forecasts a loss per share between $1.35 and $1.05 and revenue between $2.85 billion to $3.05 billion, compared to Street estimates of a $1.39 loss and $2.92 billion revenue.
Western Digital Stock Jumps 13% Following Q1 Earnings
Western Digital (NASDAQ:WDC) shares rose nearly 13% in pre-market today after beating quarterly earnings expectations. They reported a Q1 loss of $1.76 per share, which is $0.15 better than the anticipated $1.91 loss, and revenue was $2.75 billion, surpassing the expected $2.66 billion.
While revenue increased 3% quarter-over-quarter due to 11% and 14% rises in Client and Consumer revenue respectively, Cloud revenue fell 12% quarter-over-quarter.
For Q2/24, the company forecasts a loss per share between $1.35 and $1.05 and revenue between $2.85 billion to $3.05 billion, compared to Street estimates of a $1.39 loss and $2.92 billion revenue.
Mizuho is Enthusiastic About Western Digital
Mizuho analysts are enthusiastic about Western Digital (NASDAQ:WDC) as a strong long-term investment. They see the company as a compelling opportunity due to under-ownership and the positive impact of NAND production cutbacks on spot pricing.
The analysts believe that Western Digital's NAND business is poised for growth, with rising spot pricing and increased NAND demand from smartphone manufacturers. Additionally, they noted the impending split of Western Digital's business, with the NAND division set to merge with Kioxia, potentially boosting its valuation.
Western Digital Reports Weak Outlook Despite Q4 Beat
Western Digital (NASDAQ:WDC) is facing challenges as it guided for a larger loss in Q1/24, despite reporting Q4 results that surpassed Wall Street estimates.
For Q4, Western Digital posted an adjusted loss of $1.98 per share on revenue of $2.70 billion. Wall Street analysts had predicted a slightly higher loss of $2.02 per share on revenue amounting to $2.53 billion.
Looking ahead to Q1, the company's guidance indicates a projected loss in the range of $1.80 to $2.10 per share, with revenue expected to fall between $2.55 billion and $2.75 billion. These estimates are below what analysts were expecting, with Street estimates predicting a loss of $1.43 per share and revenue of $2.26 billion.
Western Digital Corporation Downgraded to Hold at Deutsche Bank
Deutsche Bank analysts downgraded Western Digital Corporation (NASDAQ:WDC) to hold from buy and lowered their price target to $40 from $56.
The analysts believe the company's Q1 revenue and EPS are tracking below the low end of guidance, and the Q2 outlook is also likely to be meaningfully below current Street estimates. According to the analysts, it is quite possible that, over the next few quarters, the company will re-test the trough margin (operating margin of 4%) and EPS ($0.17) reached in Q2/19.
Of particular concern to the analysts is that the company now expects its free cash flow to be negative in fiscal 2023. While the analysts do not see a significant downside to the current share price given the stock is trading at approximately 1.0x EV/Sales, the analysts don’t see any meaningful upside in the near term as oversupply in the flash memory market persists and macro concerns escalate.
