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Bear of the Day: Western Digital (WDC)

Tracey Ryniec

Western Digital Corp. (WDC) is dealing with soft market conditions. This Zacks #5 (Strong Sell) as sales are expected to be down 19.4% year-over-year.

Western Digital provides storage solutions for data, including data centers and mobile sensors to personal devices. It's brands included Western Digital, G-Technology, SanDisk and WD.

A Miss in the Fiscal Third Quarter

On Apr 29, Western Digital reported its fiscal third quarter earnings report and missed on the Zacks Consensus Estimate by 32 cents. Earnings were $0.17 versus the consensus of $0.49.

“Market conditions have generally been consistent with our expectations, and while the business environment remains soft, there are initial indications of improving trends,” said Steve Milligan, chief executive officer, Western Digital.

“Our expectation for the demand environment to further improve for both flash and hard drive products for the balance of calendar 2019 is largely unchanged. We are executing well on enhancing our product portfolio, driving technology advancements, rightsizing our factory production levels and lowering our cost and expense structure, all of which position us to emerge stronger as market conditions improve.”

Analysts Cut Estimates

The analysts cut estimates after this miss.



9 estimates were cut in the last month, which has pushed the Zacks Consensus down to $4.88 from $5.55.

That's a decline of 67% from the $14.73 it made last year.

8 estimates were also slashed in the prior 30 days on fiscal 2020. The consensus has sunk to $3.72 from $5.18, that's another 23% decline.

Shares Rebound Off Lows

Shares have been under pressure over the last year. They've fallen 40%.

But they've rebounded in 2019 and are now up 26%.



Western Digital is still cheap, with a forward P/E of 9.7. But it's unclear if the earnings slide is over.

For those interested in this space, you may want to look at Seagate Technology (STX) which is a Zacks Rank #3 (Hold). It's also cheap with a forward P/E of 10.

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