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Western Digital (WDC) Loses 7 EB of Flash Output, Cuts Q3 View

·4 min read

Western Digital WDC recently provided an update on the production status of its joint venture (JV) flash memory manufacturing facilities in Japan.

On Feb 9, 2022, Western Digital had disclosed that on account of contamination of certain material used in its manufacturing processes, production operations at both its Yokkaichi and Kitakami JV, and flash fabrication facilities had been hampered. The company had estimated a reduction of its flash availability of at least 6.5 exabytes (EB) due to this unforeseen event. The company was working closely with Kioxia, its JV partner, to implement necessary measures that will help the plants return to normal operational status as quickly as possible.

In the latest update issued by the company on Mar 2, it revealed that production operations at its Yokkaichi and Kitakami JV flash fabrication facilities had been restored to normal levels in late February. However, the company’s flash availability will be trimmed by approximately 7 EB, occurring primarily in its third and fourth fiscal quarters, as the facilities struggle to spring back to full production level.

Amid this dull scenario, Western Digital also slashed its third-quarter fiscal 2022 guidance.

The company now expects non-GAAP revenues between $4.20 billion and $4.40 billion, lower than the previous guidance of $4.45-$4.65 billion.

GAAP gross margin is forecast in the range of 24-26%, below the previous range of 30-32%. However, the company maintained its non-GAAP gross margin projection at the range of 30-32%.

Non-GAAP diluted earnings per share are anticipated in the range of $1.30-$1.60, lower than the previous forecast of $1.50-$1.80. Diluted shares outstanding are forecast to be 316 million, below the previous outlook of 318 million shares.

A Leading Storage Device Stock

Western Digital is witnessing robust demand from cloud customers and recovering enterprise and video and image application markets. Strong demand for 18-terabyte (TB) and 20TB energy-assisted drives and enterprise solid state drives (SSDs) is expected to drive Western Digital’s top line. Demand for the WD Black product line is also rising due to gamers’ preference for more customized solutions. Further, encouraging PC shipment trends led by surging demand for notebooks are likely to support the company’s hard disk drive (HDD) business.

Recently, Western Digital launched its WD Red Pro 20TB for $499.99. This WD Red Pro is one of the most spacious HDDs currently on the market and has transfer speeds of up to 268 megabyte per second.

In the last reported quarter, the company witnessed stellar results, wherein both the bottom and the top line surpassed the Zacks Consensus Estimate. The company posted second-quarter fiscal 2022 non-GAAP earnings of $2.30 per share, beating the Zacks Consensus Estimate by 8%. The bottom line increased 233% year over year. Revenues of $4.833 billion beat the consensus metric by 0.6% and increased 23% year over year.

Shares of WDC have dropped 18.4 in the past year against the industry’s rise of 0.6%.

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Zacks Investment Research

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Zacks Rank & Key Picks

WDC carries a Zacks Rank of 3 (Hold) currently.

Some better-ranked stocks from the broader technology space include Progress Software PRGS, Badger Meter BMI and Iridium Communications IRDM. While Progress Software and Badger Meter sport a Zacks Rank #1 (Strong Buy), Iridium carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Progress Software has a projected earnings growth rate of 3.62% for fiscal 2022. The Zacks Consensus Estimate for Progress Software’s fiscal 2022 earnings has been revised upward by 6 cents in the past 60 days. The long-term earnings growth rate of PRGS is pegged at 2%.

Progress Software’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 26.8%. Shares of PRGS have gained 7.1% in the past year.

Badger Meter has a projected earnings growth rate of 5.77% for 2022. The Zacks Consensus Estimate for Badger Meter’s 2022 earnings has been revised upward by 19 cents in the past 60 days.

Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the last four quarters and met estimates once, the average surprise being 14%. Shares of BMI have dropped 3.3% in the past year.

Iridium has a projected earnings growth rate of 271.43% for 2022. The Zacks Consensus Estimate for Iridium’s 2022 earnings has been revised upward by a penny in the past 90 days.

Iridium’s earnings beat the Zacks Consensus Estimate in two of the last four quarters and met estimates twice, the average surprise being 39.4%. Shares of IRDM have gained 2.8% in the past year.

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