Strong Storage Demand Drives A Beat For Western Digital
Western Digital (NASDAQ: WDC) reported strong fourth-quarter results, as both its earnings per share and revenue beat market expectations. The company’s revenues grew by 5.7% year-over-year to $5.12 billion, largely driven by a higher mix of flash-based revenues and strong demand for enterprise solutions. The company’s Data Center Devices and Solutions business shipped about 55 exabytes of data, an impressive 64% year-over-year growth. Other businesses experienced exabytes growth as well. However, HDD shipments saw a decline as notebook and desktop units struggled to keep up with the pace. This is unsurprising because of the changing landscape in the storage industry, as notebook and desktop manufacturers have increasingly started to prefer SSDs over HDDs.
Western Digital’s conservative Q1 guidance hurt the company’s stock price as it dipped by 7.5% post the announcement. The company’s guidance for revenues of $5.1-$5.2 billion and EPS of $3-$3.10 are lower than the consensus estimates for revenue of $5.4 billion and EPS of $3.60. We are positive about the company’s future outlook and maintain a $96 price estimate for Western Digital, which is ahead of the current market price. Our interactive dashboard for Western Digital’s earnings details our forecasts and estimates for the company. Below we outline the key takeaways from Western Digital’s Q4.
- Should You Pick Western Digital Stock At $65 After 25% Gains This Year?
- After Rising Over 30% In 2023 Is This Casino Stock A Better Pick Over Western Digital Stock?
- Which Is A Better Pick – Western Digital Stock Or Expedia?
- Will Western Digital Stock Rebound To Its Pre-Inflation Shock Highs?
- Will Western Digital Stock See Higher Levels After A 20% Rise This Year?
- Western Digital Stock Set For Bounce After Weak Post-Earnings Performance?
Data Center Devices And Solutions To Continue Upward Trend
Given the success of enterprise drives, Western Digital expects greater than 65% growth in exabytes for 2018. Given the strong historical trend and favorable outlook, this seems to be a reasonable expectation. We expect the growth to be fueled by increasing demand for high capacity drives in data centers, artificial intelligence, and big data. Western Digital’s 10 terabytes and above capacity hard disks are doing well, and we expect this to continue in the future. Moreover, the company’s helium drives, which are more reliable and efficient, should cater to the ever-increasing needs of data management centers. Meanwhile, the technological advancements in enterprise SSDs have enabled the company to price its products competitively. This should result in the stronger adoption of enterprise SSDs, as demand for high performance drives increases.
Stabilization Of NAND Supply To Boost Sales Of NAND Based Products
The supply-demand imbalance for NAND in 2017 resulted in problems for the Western Digital, as SSD prices increased, resulting in reduced adoption. However, the situation has stabilized now as supply has actually outpaced the demand. This should result in lower prices for NAND based drives, thereby narrowing the price difference between SSDs and HDDs. Consequently, the company should experience increased adoption of its mainstream client SSDs. Western Digital is confident in the manufacturing yields of its 64-layer 3D NAND flash offerings, which bodes well for the future. Furthermore, the company’s acquisition of SanDisk has proven to be a sound decision. SanDisk is one of the leading mobile flash storage suppliers in the world, and with large mobile manufacturers slated to release their products later in the year, we expect further strong contributions.
What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
More Trefis Research
Like our charts? Explore example interactive dashboards and create your own