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Western Digital Corp WDC

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Stock XNAS Rating as of
$48.02 +0.71 (1.50%)
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Company Report

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Western Digital Earnings: $42 FVE Intact; Storage Market Recovery Begins and Flash Spinoff Announced

William Kerwin,

We maintain our $42 fair value estimate for no-moat Western Digital after the firm reported a good first quarter and announced intentions to spin off of its flash chip business. We view the spinoff as value-neutral to shareholders as we don’t foresee any significant cost efficiencies gained as separate entities, but a cash infusion could help position the flash business for better growth. The market liked the announcement, and the stock is up about 6%. Western’s fiscal first-quarter results were positive, exceeding our expectations for revenue and profitability. Both HDD and flash markets showed signs of sequential improvement in the quarter, and management expects further gradual strengthening in the December quarter. We see shares as fairly valued.

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Price vs Fair Value

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WDC is trading at a 13% premium.
Price
$47.31
Fair Value
$38.00
Uncertainty
High
1-Star Price
$57.80
5-Star Price
$97.40
Economic Moat
Qnm
Capital Allocation
Gwsjcmh

Bulls Say, Bears Say

Bulls

We expect tight NAND supply and strong pricing over the next two years to fuel sales growth and expand margins for Western Digital.

Bears

We think the HDD and flash markets are commoditylike and cyclical, leaving Western Digital vulnerable to market pricing declines that can shrink the top line and sink margins.

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Trading Information

Previous Close Price
$47.31
Day Range
$47.05–48.11
52-Week Range
$29.74–48.86
Bid/Ask
$48.01 / $48.03
Market Cap
$15.57 Bil
Volume/Avg
2.0 Mil / 5.0 Mil

Key Statistics

Price/Earnings (Normalized)
249.00
Price/Sales
1.33
Dividend Yield
—
Dividend Yield (Forward)
—
Total Yield
—

Company Profile

Western Digital is a leading vertically integrated supplier of data storage solutions, spanning both hard disk drives and solid-state drives. In the HDD market it forms a practical duopoly with Seagate, and it is the largest global producer of NAND flash chips for SSDs in a joint venture with competitor Kioxia.
Sector
Technology
Industry
Computer Hardware
Stock Style Box
Mid Value
Total Number of Employees
53,000
Website
https://www.wdc.com

Competitors

Valuation

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Metric
WDC
005930
STX
Price/Earnings (Normalized)
 249.0010.84438.01
Price/Book Value
 1.521.39—
Price/Sales
 1.331.492.40
Price/Cash Flow
 —7.63—
Price/Earnings
WDC
005930
STX

Financial Strength

Metric
WDC
005930
STX
Quick Ratio
 0.601.940.58
Current Ratio
 1.312.801.07
Interest Coverage
 −5.938.17−1.09
Quick Ratio
WDC
005930
STX

Profitability

Metric
WDC
005930
STX
Return on Assets (Normalized)
 −7.08%8.29%−1.36%
Return on Equity (Normalized)
 −15.50%10.89%—
Return on Invested Capital (Normalized)
 −8.17%9.57%3.37%
Return on Assets
WDC
005930
STX

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