- Western Digital Corp (NASDAQ:WDC) clocked 8% year-on-year revenue growth to $4.53 billion in Q4, beating the consensus of $4.49 billion.
- Non-GAAP EPS of $1.78 beat the consensus of $1.68.
- Barclays analyst Tom O'Malley had an Equal Weight and $55 price target.
- The market expected a reset, but the depths of decline and the exclusion of potential DC weakness calls into question the BV base case, he noted.
- Mizuho analyst Vijay Rakesh reiterated a Buy rating with a $62 price target, down from $68, as he saw the potential to unlock value via an activist shareholder and NAND separation amid headwinds.
- WDC reported an inline June quarter but guided its September quarter down significantly.
- He also expected the gross margins to decline Q/Q.
- He admitted that WDC noted a significant cut to September quarter NAND revenues at $1.6 billion, which could be close to a bottom. However, he saw NAND pricing headwinds into year-end.
- He saw Client HDD revenue down 30% Y/Y, WDC to reduce output capacity footprint, and nearline remains stable. Still, he believes there are worries about Cloud spending.
- Citi analyst Jim Suva cut its price target to $60 from $75 on reduced sales and EPS and a much higher tax rate from R&D tax law changes.
- While the results by Western Digital were solid, the company saw a sharp reduction in orders late in the quarter, leading to a material guide down for the September quarter, he noted.
- Specifically, the PC and consumer electronics industry is facing a slowdown, and big-box retailers are reducing inventory.
- On a positive note, data center and cloud remained strong.
- He continues to view WDC stock as a deep value and shareholder activism catalyst, working with shareholders for various potential future value creation actions.
- Rosenblatt analyst Kevin Cassidy had a Neutral and cut the price target to $45 from $60.
- Following an inline June quarter, management pointed to a sudden drop-off in orders as PC, smartphone, and retail customers made plans to reduce inventory, leading to a guidance miss by a significant margin.
- He saw it hopefully as a steep inventory adjustment and expected demand to resume in the out quarters.
- He believed that once NAND Flash ASPs fall faster than cost reduction, it takes many quarters before gross margins can recover, particularly during an over-supplied market.
- He modeled a gradual demand recovery.
- Price Action: WDC shares traded higher by 2.46% at $48.25 on the last check Monday.
