Why Has Western Digital Stock Underperformed The S&P Since 2017?

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Western Digital

Western Digital (NASDAQ: WDC) stock price dropped around 45% from $80 in 2017 end to around $43 currently, primarily due to unfavorable changes in its P/S multiple. During this period, the company also witnessed a 9% drop in revenues and a 4% rise in the outstanding share count. Due to this, the company’s stock price has taken a hit and largely underperformed the S&P 500, which returned more than 50% over the same period.

In our interactive dashboard, Why Western Digital Stock Moved: WDC Stock Has Lost 45% Since 2017, we break down the factors behind this move.

(A) WDC’s Total Revenue has dropped 9% from $20.6 billion in FY 2018 to $18.8 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 $18.8 billion currently, as of FY ’22 (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 ’22, sales in China, Hong Kong, and the rest of Asia make up the bulk of WDC’s revenues at 52%, with sales in the United States second at 29%.
  • 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 13% from $69.44 in FY 2018 to $60.56 currently

  • WDC’s revenue dropped from $20.6 billion in FY 2018 to $18.8 billion currently, while the outstanding share count rose from 297.4 million in FY 2018 to around 310 million currently.
  • Due to this, RPS has dropped 13% from $69.44 in FY ’18 to $60.56 currently.

(C) Price-To-Sales (P/S) multiple for WDC has hovered between 0.5x and 1.2x between 2017 to now, and currently stands at 0.7x, still lower than the 1.2x level in late 2017

  • WDC’s P/S multiple stood at 1.2x in 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 0.7x.
  • For additional details about the company stock returns and comparison to peers, see Western Digital (WDC) Stock Return Comparison.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Sep 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 WDC Return 3% -33% -36%
 S&P 500 Return 4% -14% 84%
 Trefis Multi-Strategy Portfolio 6% -11% 253%

[1] Month-to-date and year-to-date as of 9/12/2022
[2] Cumulative total returns since the end of 2016

 

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