Data storage

Western Digital (NASDAQ:WDC) – “Down Cycle” Looms for Data Storage Stocks; A bearish analyst does not cover his reasons

  • Reference analyst Mark Miller reiterated a sell-off on Western Digital Corporation WDC and a $34 price target citing concerns about the strength and duration of the bearish cycle and weakening hyperscale.
  • At an investor conference, Western Digital management said it was preparing for a demand-driven down cycle.
  • The supply of NAND bits currently exceeds demand and is expected to grow by around 20%.
  • Inventory adjustments are underway, he noted. Supply and demand affected flash margins the most.
  • Management hoped for better visibility by the next quarter. Since the last earnings call, things have gotten a bit more difficult, he observed.
  • Consistent with Seagate Technology Holdings PLC STX view, hyperscale customers have become more cautious.
  • Miller found Western Digital in a much stronger position to weather a bear cycle than the previous one, thanks to lower debt, better access to capital and a better mix.
  • The company is managing discretionary spending, slowing nodal transitions and capacity growth, he added.
  • Miller downgraded WDC to Sell from Hold with a price target of $34 just a week ago, citing cloud customer concerns and Asain economic trends.
  • Miller noted that Seagate has joined the likes of Micron Technology, Inc. MU and Nvidia Corp. (NASDAQ: NVDA) to lower outlook. The analyst also downgraded Seagate to Hold from Buy.
  • Price action: Shares of WDC closed up 2.32% at $42.41 on Thursday.
  • Photo via Wikimedia Commons