What Happened: Shares of leading data storage manufacturer Western Digital (NASDAQ: NASDAQ:WDC) jumped 14.8% in the pre-market session after the company reported first-quarter results that blew past analysts' EPS expectations, driven by strong outperformance in its flash memory division. We were also glad its inventory levels shrunk. On the other hand, its operating margin fell, and its gross margin shrunk.
Aside from the earnings print, Western Digital said it would separate its HDD and flash memory businesses into two independent, public companies. The spin-off comes after activist hedge fund Elliot Management disclosed a nearly $1 billion stake in the company last year. Elliot is known for pushing its portfolio companies to pursue value-added strategies for shareholders. The transaction is targeted for the second half of calendar year 2024. Overall, it was a mixed quarter for the company.
Is now the time to buy Western Digital? Find out by reading the original article on StockStory.
What is the market telling us: Western Digital's shares are quite volatile and over the last year have had 18 moves greater than 5%. But moves this big are very rare even for Western Digital and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was six months ago, when the stock gained 7.2% on the news that a report that the company is stepping up merger talks with Kioxia Holdings Corp. According to the report, the deal would give Kioxia a 43% stake in the merged entity, with Western Digital holding a 37% stake and the rest going to existing shareholders. Kioxia recently put its IPO plans on hold due to the weak flash-memory market. The memory chip market is in a tough spot as flash memory prices plummet and demand fails to pick up amid bloated inventories.
Western Digital is up 31.6% since the beginning of the year, but at $41.30 per share it is still trading 11% below its 52-week high of $46.40 from October 2023. Investors who bought $1,000 worth of Western Digital's shares 5 years ago would now be looking at an investment worth $999.52.
