On Thursday, Western Digital Corp. (NASDAQ:WDC) stock received a reaffirmation of its Outperform rating and an $85.00 price target from Evercore ISI, following the company's latest earnings report.
Western Digital's quarterly performance showcased a top-line figure that matched forecasts, but a significant earnings per share (EPS) beat at $1.44, compared to the anticipated $1.18. This outperformance was attributed to substantial margin growth in both the Hard Disk Drive (HDD) and Flash segments.
The company reported a notable gross margin of 36.3%, marking a 700 basis point increase from the previous quarter. Management anticipates continued margin improvement, projecting 37-39% for the September quarter.
HDD revenue saw a 14% rise quarter over quarter, propelled by growth in both unit sales and pricing, with total Exabytes (EB™) shipped increasing by 12% to approximately 144EB. This suggests Western Digital has made significant market share gains.
Conversely, Flash revenue grew by around 3% quarter over quarter, as a 14% average selling price (ASP) increase was largely offset by a 7% decrease in bit shipments.
Looking ahead to the September quarter, the company's guidance was slightly below expectations. The guidance reflects potential softness in Flash revenues, primarily due to ASP challenges attributed to a higher mix of mobile products, which may reduce ASPs sequentially. This trend is expected to possibly extend into the December quarter, with the degree of impact depending on the strength of mobile demand.
Additionally, the company anticipates dis-synergy charges of $15-$25 million related to the planned spin-off, with these charges expected to rise to $35-$45 million in the December quarter.
Western Digital's management remains optimistic about both the near and long-term prospects, especially regarding the shift to a build-to-order model for HDDs. This strategic move is aimed at addressing customer shortages, compelling them to either provide greater visibility or resort to purchasing from distribution channels.
In other recent news, Western Digital Corporation (NASDAQ:WDC) has reported impressive financial results, with Q4 revenues reaching $3.8 billion and full-year revenues totaling $13 billion. The company has exceeded its gross margin targets in both Flash and HDD segments and is preparing to separate these businesses by the end of the year.
Western Digital's non-GAAP earnings are estimated at $8.39 per diluted share for fiscal year 2025, as reported by Benchmark, which also raised its price target for the company's shares to $92.
Several other firms have also expressed confidence in Western Digital's financial outlook. Morgan Stanley maintained an Overweight rating and increased the price target to $94, while Rosenblatt reiterated a Buy rating with a steady price target of $115.
Wells Fargo kept an Overweight rating with a steady price target of $95, and Susquehanna maintained a Neutral rating but raised the share target to $88.00. Mizuho also maintained a Buy rating and increased the price target to $90.
These recent developments reflect a positive trajectory for Western Digital, with a focus on its impending separation into two independent entities, and its strategic positioning in the data storage market. The company also anticipates a dip in Q1 revenue, expecting it to range between $4 billion and $4.20 billion, due to a decline in demand for its data storage products.
InvestingPro Insights
Following Western Digital's recent earnings report and Evercore ISI's reaffirmation of its Outperform rating, InvestingPro provides additional insights into the company's financial health and market position. Analysts on InvestingPro have revised their earnings upwards for the upcoming period, reflecting a positive outlook on the company's profitability. This aligns with Western Digital's EPS beat and the gross margin improvement noted in their latest quarterly performance.
Real-time data from InvestingPro indicates a market capitalization of $20.08 billion, with revenue growth over the last twelve months at 5.56%. Despite a negative P/E ratio of -35.71, reflecting challenges in the past year, the company's stock has experienced a year-to-date price total return of 17.45%, suggesting a recovery trend. The gross profit margin stands at 22.36%, which may be an area for potential improvement as the company continues to navigate market dynamics.
Investors interested in Western Digital's prospects may also consider the InvestingPro Tips that highlight the company as a prominent player in the Technology Hardware, Storage & Peripherals industry, and the anticipation of net income growth this year. With additional insights available on InvestingPro, including a total of 11 tips for Western Digital, investors can make more informed decisions by visiting the dedicated page for Western Digital on InvestingPro.
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