Down 8% This Week, Is Western Digital Stock Now A Buy?

by Trefis Team
Western Digital
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The stock price of Western Digital (NASDAQ:WDC) reached its 52-week high of $78 in June this year before the recent sell-off, which led to a 8% drop in WDC stock within a week, to levels of around $64 currently. The sell-off in the broader markets can be attributed to rising Covid-19 cases due to the new Delta variant, which may result in slower economic growth, compared to what was earlier anticipated. Further, semiconductor and particularly memory hardware stocks, overall, took a bigger beating, on concerns over DRAM pricing weakening by the end of 2021, which could impact company margins.

Now, after an 8% fall in a week, will WDC stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for WDC stock average 1.8% in the next one-month (twenty-one trading days) period after experiencing a 7.8% drop over the previous week (five trading days).

But how would these numbers change if you are interested in holding WDC stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Western Digital stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

IF WDC stock moved by -5% over five trading days, THEN over the next twenty-one trading days WDC stock moves an average of 1.5%, with a decent 53.5% probability of a positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of Western Digital Stock Movements:

Question 1: Is the average return for Western Digital stock higher after a drop?

Answer: Consider two situations,

Case 1: Western Digital stock drops by 5% or more in a week

Case 2: Western Digital stock rises by 5% or more in a week

Is the average return for Western Digital stock higher over the subsequent month after Case 1 or Case 2?

WDC stock fares better after Case 2, with an average return of 1.5% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 2.4% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Western Digital stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Western Digital stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For WDC stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Western Digital after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Western Digital stock by changing the inputs in the charts above.

While Western Digital stock seems attractive, it is helpful to know how its peers stack up. Western Digital Comparison With Peers summarizes how Western Digital compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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