Why Has Western Digital Stock Underperformed Despite Revenue Growth?

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Western Digital

Western Digital (NASDAQ: WDC) stock price dropped 30% from around $63 at 2019 end, to almost $45 currently, primarily due to unfavorable changes in its P/S multiple. This comes as a surprise, as the company has witnessed a rise in revenue over this period, and revenue per share has risen, despite a 6% increase in the outstanding share count.

In our interactive dashboard, Why Western Digital Stock Moved: WDC Stock Has Lost 28% Since 2019, we break down the factors behind this move.

(A) WDC’s Total Revenue has grown 14% from $16.6 billion in 2019 to $18.9 billion on an LTM basis

  • WDC’s total revenue consistently hovered below $17 billion between FY ’19 and FY ’21, but ironically did not witness a drop in sales due to Covid.
  • Revenues have since risen strongly, and currently stand higher at $18.9 billion on an LTM basis, driven primarily by rising sales to east Asian countries.
  • The company derives its sales almost evenly from HDD-based and flash-based products, both making up roughly half of the company’s $16.9 billion FY ’21 sales.
  • For details about WDC revenues and comparison to peers, see Western Digital (WDC) Revenue Comparison
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(B) Revenue per share (RPS) increased 7.2% from $56.69 in 2019 to $60.79 currently

  • WDC revenue rose from $16.6 billion in 2019 to $18.9 billion currently, while the outstanding share count increased from 292 million in 2019 to 311 million currently.
  • Due to this, RPS has risen from $56.69 in FY ’19 to $60.79 currently.

(C) Price-To-Sales (P/S) multiple for WDC hovered between 1x and 1.2x from 2019 to 2021, but stands at 0.8x currently, much lower than its 2019 level

  • Despite WDC’s consistent performance since 2019-end, its P/S multiple stayed steady between 1x and 1.2x till 2021.
  • However, amidst current geopolitical tensions dragging down the broader markets, the P/S multiple has pulled back and currently stands at around 0.8x.
  • For additional details about the company’s historical returns and comparison to peers, see Western Digital (WDC) Stock Return.

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Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 WDC Return -6% -26% -29%
 S&P 500 Return -2% -10% 92%
 Trefis MS Portfolio Return -3% -12% 245%

[1] Month-to-date and year-to-date as of 3/9/2022
[2] Cumulative total returns since the end of 2016

 

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