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Western Digital (WDC)
NASDAQ:WDC
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Western Digital
(NASDAQ:WDC)
Rating:66Neutral
Price Target:
$48.00
▼( -4.34% Downside)
Positive Factors
Data Center Expansion
Western Digital is well-positioned to capitalize on a once-in-a-generation Data Center build-out.
Share Repurchase Program
Western Digital announced that the Board of Directors has authorized a $2bn share repurchase program effective immediately.
Negative Factors
Customer Concentration Risk
WD's Top-10 customers accounted for 73% of sales, indicating high customer concentration risk.
Technology Lag
Western Digital is at least 12 months behind peer Seagate Technology in HAMR technology.
Western Digital (WDC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$17.51B
Dividend YieldN/A
Average Volume (3M)7.30M
Price to Earnings (P/E)9.5
Beta (1Y)2.18
Revenue Growth21.22%
EPS GrowthN/A
CountryUS
Employees51,000
SectorTechnology
Sector Strength77
IndustryComputer Hardware
Share Statistics
EPS (TTM)1.36
Shares Outstanding348,878,360
10 Day Avg. Volume6,518,145
30 Day Avg. Volume7,295,320
Financial Highlights & Ratios
PEG Ratio0.39
Price to Book (P/B)3.20
Price to Sales (P/S)0.00
P/FCF Ratio20.42
Enterprise Value/Market Cap1.22
Enterprise Value/Revenue0.37
Enterprise Value/Gross Profit3.99
Enterprise Value/Ebitda2.86
Forecast
1Y Price Target
$58.00Price Target Upside15.58% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering19
Western Digital Business Overview & Revenue Model
Company DescriptionWestern Digital Corporation develops, manufactures, and sells data storage devices and solutions in the United States, China, Hong Kong, Europe, the Middle East, Africa, rest of Asia, and internationally. It offers client devices, including hard disk drives (HDDs) and solid state drives (SSDs) for computing devices, such as desktop and notebook personal computers (PCs), smart video systems, gaming consoles, and set top boxes; flash-based embedded storage products for mobile phones, tablets, notebook PCs, and other portable and wearable devices, as well as automotive, Internet of Things, industrial, and connected home applications; and flash-based memory wafers. The company also provides data center devices and solutions comprising enterprise helium hard drives; enterprise SSDs consisting of flash-based SSDs and software solutions for use in enterprise servers, online transactions, data analysis, and other enterprise applications; data center solutions for data storage systems and tiered storage models; and data storage platforms. In addition, it offers client solutions, such as external HDD storage products in mobile and desktop form; client portable SSDs; removable cards that are used in consumer devices comprising mobile phones, tablets, imaging systems, and cameras and smart video systems; universal serial bus flash drives for use in the computing and consumer markets; and wireless drive products used in-field back up of created content, as well as wireless streaming of high-definition movies, photos, music, and documents to tablets, smartphones, and PCs. The company sells its products under the G-Technology, SanDisk, and WD brands to original equipment manufacturers, distributors, dealers, resellers, and retailers. Western Digital Corporation was founded in 1970 and is headquartered in San Jose, California.
How the Company Makes MoneyWestern Digital makes money through the sale of its data storage products and solutions to various sectors, including enterprises, cloud service providers, and individual consumers. The company's revenue streams are primarily derived from its two main product groups: HDDs and SSDs. HDDs are a significant revenue source, serving traditional storage needs in data centers and personal computing, while SSDs and flash memory products cater to the growing demand for faster and more efficient storage solutions in enterprise and consumer electronics. Additionally, Western Digital has established strategic partnerships with major tech companies and OEMs, which help expand its market reach and drive sales. The company also invests in R&D to innovate and enhance its product offerings, maintaining competitiveness in the rapidly evolving storage technology market.
Western Digital Financial Statement Overview
Summary
Western Digital shows financial recovery with improved profitability and cash flow. However, revenue decline and historical volatility in earnings pose risks. The balance sheet reflects moderate leverage and strong ROE, but sustainability concerns remain.Income Statement
Western Digital's income statement shows a mixed performance. The TTM gross profit margin stands at 18.09%, indicating moderate profitability. The net profit margin of 15.41% is impressive compared to the previous year's negative margin, highlighting a significant improvement in profitability. However, revenue has declined by 17.90% compared to the previous year, posing a potential concern. The EBIT margin of 17.51% reflects operational efficiency, yet the EBITDA margin of 0.25% suggests limited earnings before depreciation and amortization.62
Positive
Balance Sheet
The balance sheet reveals a debt-to-equity ratio of 1.42, indicating a moderate level of financial leverage. Return on equity (ROE) is strong at 31.79%, driven by recent profitability improvements, but it might not be sustainable given past negative net incomes. The equity ratio stands at 31.63%, showing a decent proportion of assets financed by equity, though lower than some peers in the industry.58
Neutral
Cash Flow
Cash flow analysis indicates solid performance with a free cash flow growth rate of 209.48%, reflecting improved cash generation and fiscal management. The operating cash flow to net income ratio is 0.80, suggesting strong cash earnings support. The free cash flow to net income ratio of 0.52 further demonstrates adequate cash flow relative to profitability, indicating good liquidity management.65
Positive
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 14.44B | 13.00B | 12.32B | 18.79B | 16.92B | 16.74B | Gross Profit |
| 5.33B | 2.94B | 1.89B | 5.87B | 4.52B | 3.78B | EBIT |
| 2.57B | -317.00M | -1.28B | 2.39B | 1.22B | 335.00M | EBITDA |
| 2.92B | 324.00M | -400.00M | 3.60B | 2.32B | 1.93B | Net Income Common Stockholders |
| 1.64B | -798.00M | -1.71B | 1.55B | 821.00M | -250.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 3.48B | 1.88B | 2.02B | 2.33B | 3.37B | 3.05B | Total Assets |
| 16.37B | 24.19B | 24.43B | 26.26B | 26.13B | 25.66B | Total Debt |
| 7.33B | 7.43B | 7.07B | 7.02B | 8.72B | 9.57B | Net Debt |
| 3.86B | 5.55B | 5.05B | 4.70B | 5.36B | 6.53B | Total Liabilities |
| 10.96B | 13.14B | 23.55B | 14.04B | 15.41B | 16.11B | Stockholders Equity |
| 5.41B | 10.82B | 10.85B | 12.22B | 10.72B | 9.55B |
| Cash Flow | Free Cash Flow | ||||
| 854.00M | -781.00M | -1.22B | 773.00M | 895.00M | 177.00M | Operating Cash Flow |
| 1.31B | -294.00M | -408.00M | 1.88B | 1.90B | 824.00M | Investing Cash Flow |
| 162.00M | -27.00M | -762.00M | -1.19B | -765.00M | 278.00M | Financing Cash Flow |
| 111.00M | 187.00M | 875.00M | -1.72B | -817.00M | -1.51B |
Western Digital Technical Analysis
Positive
50.18
Price Trends
42.04
Positive
45.18
Positive
47.39
Positive
Market Momentum
2.66
Negative
71.31
Negative
70.12
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WDC, the sentiment is Positive. The current price of 50.18 is above the 20-day moving average (MA) of 46.57, above the 50-day MA of 42.04, and above the 200-day MA of 47.39, indicating a bullish trend. The MACD of 2.66 indicates Negative momentum. The RSI at 71.31 is Negative, neither overbought nor oversold. The STOCH value of 70.12 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for WDC.
Western Digital Risk Analysis
Western Digital disclosed 28 risk factors in its most recent earnings report. Western Digital reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 3 New Risks
1.
The Separation may not achieve the anticipated benefits and could expose us to new risks, including with respect to our existing indebtedness and future capital structure. Q2, 2024
2.
The proposed separation of our HDD and Flash business units into two independent public companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all. Q2, 2024
3.
Our review of the Separation has and will continue to involve significant time, expense and resources and could disrupt or adversely affect our business. Q2, 2024
Western Digital Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $24.66B | 22.81 | 21.03% | ― | 82.10% | 6.35% | |
78 Outperform | $20.22B | 18.14 | 114.33% | 2.08% | 5.46% | 23.49% | |
73 Outperform | $23.93B | 16.29 | -109.27% | 2.52% | 36.29% | ― | |
72 Outperform | $18.14B | 181.24 | 8.29% | ― | 11.92% | 74.08% | |
66 Neutral | $17.51B | 9.54 | 28.45% | ― | 21.22% | ― | |
66 Neutral | $26.38B | 10.05 | 84.33% | 3.96% | 1.03% | -18.56% | |
61 Neutral | $11.29B | 10.07 | -7.05% | 2.96% | 7.47% | -10.75% |
* Technology Sector Average
Performance Comparison
WDC
Western Digital
50.18
-7.35
-12.78%
HPQ
HP
27.98
-4.04
-12.62%
NTAP
NetApp
98.00
-17.77
-15.35%
STX
Seagate Tech
112.74
18.66
19.83%
SMCI
Super Micro Computer
40.09
-47.38
-54.17%
PSTG
Pure Storage
55.44
-7.08
-11.32%
Western Digital Earnings Call Summary
Earnings Call Date:Apr 30, 2025
(Q3-2025)
| % Change Since: 23.54%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong cloud revenue growth and high gross margins, along with strategic debt reduction and the initiation of a dividend. However, there were declines in consumer and client segments, and concerns about potential tariff impacts. The positive aspects slightly outweigh the challenges due to strong demand and financial performance.Q3-2025 Updates
Positive Updates
Strong Cloud Revenue Growth
Cloud revenue represented 87% of total revenue at $2.0 billion, down 4% sequentially but up 38% year-over-year, driven by the strength of the product portfolio.
High Gross Margin
Non-GAAP gross margin for the fiscal third quarter was 40.1%, a 1.7 percentage point improvement sequentially, ahead of guidance.
Successful Debt Reduction
Western Digital redeemed $1.8 billion of 2026 senior notes, strengthening the balance sheet.
Initiation of Quarterly Dividend
Announced a quarterly dividend of $0.1 per share in fiscal Q4, reflecting confidence in the business's long-term cash-generating ability.
Data Center Demand Strength
Strong demand from hyper-scale customers, with long-term agreements extending through the first half of calendar year 2026.
Negative Updates
Decline in Consumer and Client Segments
Client revenue was down 2% and consumer revenue was down 13% sequentially, primarily due to lower unit shipments and pricing.
Potential Tariff Impact
Acknowledged uncertainty and potential demand impact in the enterprise and certain parts of the distribution and retail business due to tariffs and global trade tensions.
Company Guidance
During Western Digital's third quarter fiscal 2025 conference call, the company provided guidance for the upcoming fiscal fourth quarter, projecting revenue to be $2.45 billion, plus or minus $150 million. The gross margin is expected to be between 40% and 41%, with operating expenses anticipated to slightly increase to a range of $330 million to $340 million. This increase is attributed to variable compensation, new hires, and increased research and development investments. The company also expects interest and other expenses to be around $70 million and a tax rate between 8% and 10%. Earnings per share (EPS) are projected to be $1.45, plus or minus $0.20, based on approximately 360 million shares outstanding. Additionally, it was highlighted that fiscal year 2026 will be a 53-week year, impacting the first fiscal quarter with an additional week.Western Digital Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Western Digital Appoints Kris Sennesael as New CFO
Positive
May 8, 2025
On May 6, 2025, Western Digital‘s Board of Directors appointed Kris Sennesael as Executive Vice President and Chief Financial Officer, effective May 12, 2025. Sennesael, with over 25 years of experience in finance and management in the semiconductor and technology sectors, will lead Western Digital’s global finance organization. His appointment is expected to strengthen the company’s position by balancing investment for innovation and growth with operational efficiency to create sustainable, long-term shareholder value.
Delistings and Listing ChangesBusiness Operations and Strategy
Western Digital Completes Flash Business Separation
Neutral
Apr 7, 2025
On February 21, 2025, Western Digital completed the separation of its Flash business into a new independent company, Sandisk Corporation, which now trades on the Nasdaq under the symbol ‘SNDK’. This strategic move means Western Digital will no longer consolidate Sandisk’s financial results, and historical results will be reported as discontinued operations starting in the third quarter of fiscal 2025, impacting the company’s financial reporting and potentially its market positioning.
Private Placements and FinancingBusiness Operations and Strategy
Western Digital Redeems $1.8 Billion Senior Notes
Neutral
Mar 13, 2025
On March 13, 2025, Western Digital’s Board of Directors approved amendments to the company’s bylaws, which became effective immediately. These changes address ‘universal proxy’ rules and include provisions for stockholder nominations and meeting conduct, aligning with updates to Delaware General Corporation Law. Additionally, Western Digital announced the redemption of $1.8 billion of its 4.750% Senior Notes due 2026, with the redemption date set for April 14, 2025. This move will leave $500 million of the notes outstanding and is part of the company’s financial management strategy.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.