Western Digital Earnings: The Firm Is Hopeful the End Is Near for Downcycle Turmoil

We maintain our $42 fair value estimate for Western Digital shares after the firm’s fiscal fourth-quarter results met our expectations for revenue and margins. Western Digital’s top and bottom lines are suffering from persistent demand downturns for its hard disk drive, or HDD, and flash businesses. However, management believes Western Digital is nearing the end of the downcycle, and provided guidance that indicates a flattish fiscal 2024 first quarter and expects upside thereafter, on a sequential basis. We too anticipate a recovery beginning fiscal 2024, however, we expect it to be weighted toward the back half of calendar 2024. Sharp downturns like the current one for Western Digital reflect its exposure to volatile market dynamics and its lack of economic moat, in our view. We view the stock as fairly valued.