Western Digital Stock Has Outperformed The S&P Since 2018 Despite A Drop In Sales

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Western Digital

Western Digital (NASDAQ: WDC) stock price rose 1.65x from $37 in 2018 end to around $60 currently, primarily due to favorable changes in its P/S multiple. During this period, the company in fact witnessed a 7% drop in revenues and a 5% rise in the outstanding share count. Despite this, the company’s stock price has rallied and managed to narrowly outperform the S&P 500, which returned around 60% over the same period.

In our interactive dashboard, Why Western Digital Stock Moved: WDC Stock Has Gained 65% Since 2018, we break down the factors behind this move.

(A) WDC’s Total Revenue has dropped 7.1% from $20.6 billion in FY 2018 to $19.2 billion currently

  • WDC’s total revenue initially dropped from $20.6 billion in FY ’18 to $16.6 billion in FY ’19, but demand has picked up since the pandemic and sales have risen strongly to $19.2 billion currently (WDC’s fiscal year ends in June).
  • WDC is a computer hard disk drive manufacturer and data storage company, which designs, manufactures, and sells data technology products, including storage devices, data center systems, and cloud storage services.
  • As of FY ’21, sales in China, Hong Kong, and the rest of Asia make up the bulk of WDC’s revenues at 56%, with sales in the United States second at 22%.
  • For additional details about WDC’s revenues and comparison to peers, see Western Digital (WDC) Revenue Comparison
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(B) Revenue per share (RPS) decreased 12% from $69.44 in FY 2018 to $61.39 currently

  • WDC’s revenue dropped from $20.6 billion in FY 2018 to $19.2 billion currently, while the outstanding share count rose from 297.4 million in FY 2018 to around 312.5 million currently.
  • Due to this, RPS has dropped 12% from $69.44 in FY ’18 to $61.39 currently.

(C) Price-To-Sales (P/S) multiple for WDC rose strongly from 0.5x in 2018 to 1.2x by 2021 end but has pulled back marginally to 1x currently, still 2x higher than its 2018 level

  • WDC’s P/S multiple rose strongly to around 1.2x by late 2021, on the back of rising investor expectations surrounding increased demand for its memory products, leading to a rise in the company’s sales.
  • However, due to the current geopolitical tensions and increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 1x.
  • For additional details about the company stock returns and comparison to peers, see Western Digital (WDC) Stock Return Comparison.

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Returns May 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 WDC Return 15% -7% -11%
 S&P 500 Return -2% -15% 81%
 Trefis Multi-Strategy Portfolio -3% -19% 217%

[1] Month-to-date and year-to-date as of 5/26/2022
[2] Cumulative total returns since the end of 2016

 

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