Western Digital Corporation (WDC) is an industry-leading provider of storage technologies and solutions that allow people to create, leverage, experience and preserve data. The company addresses ever-changing market needs by providing a full portfolio of compelling, high-quality storage solutions with customer-focused innovation, high efficiency, flexibility and speed. Our products are marketed under the HGST, SanDisk and WD brands to OEMs, distributors, resellers, cloud infrastructure providers and consumers.
Shares of Western Digital have decreased by a 1.26% to $47.77 on Friday; right after the data storage manufacturer’s stock price target was increased to $57 from $54 at Jefferies because of a “decreasing long-term tax rate” and more positive data storage trends. After the closing hours, the stock has further declined by another 0.75% which is alarming the buyers.
The Irvine, CA-based company, which recently acquired SanDisk, faces challenges in the hard disk drive and NAND flash storage markets, but solid-state drive penetration is lower than expected.
Western Digital has updated their investor portal will financial guidance that considers the acquisition of SanDisk, “Reflecting the ownership of SanDisk as of May 12, 2016, Western Digital now expects its fourth quarter revenue in the range of $3.35 billion to $3.45 billion compared to its earlier forecast of $2.6 billion to $2.7 billion. The company now expects its fourth quarter EPS on a non-GAAP basis to be between $0.65 to $0.70, compared with its earlier forecast of $1.00 to $1.10 per share. The new guidance includes total interest costs of approximately $220 million, which includes interest expense on newly issued debt of approximately $185 million and amortization of debt issuance costs of approximately $30 million. Interest expense on the newly issued debt includes approximately $50 million incurred prior to the deal closing date. Due to the impact of the interest expense, the company estimates a non-GAAP tax benefit of approximately $15 million for the quarter. Diluted share count for the quarter, including shares issued to SanDisk shareholders as of May 12, 2016, is expected to be 266 million, equivalent to 290 million shares on a full quarter basis.”
Analysts maintained a “buy” rating on Western Digital, but warned that Wall Street estimates for the company’s 2017 fiscal year are still too high. The company has a largely solid financial position with reasonable debt levels by most measures and expanding profit margins, which offset generally disappointing performance in the stock itself, feeble growth in the company’s earnings per share and deteriorating net income.
Steve Milligan president & CEO of the company said the following during a conference call, “The task for us is to execute on this tremendous strategic opportunity to create long term value for our customers, shareholders and employees. We have a strong history of operational excellence and of successfully integrating businesses. We plan to build on this track record with a proven and engaged team that brings together best in class capability in operations, design, manufacturing and customer service. Together with my team, I am very excited about the value of what we can accomplish as a combined company, and I look forward to keeping you informed of our progress.”
With so many major changes, it would be advised to not sell the Western Digital stocks yet as they do promise a lot of potential.