Buy or Sell Western Digital Stock?

Western Digital (WDC) stock has fallen 10% during the past day, and is currently trading at $250.23. We believe there is not much to fear in WDC stock given its overall Strong operating performance and financial condition. This is aligned with the stock’s High valuation because of which we think it is Fairly Priced.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $85 Bil in market cap, Western Digital provides data storage solutions, including HDDs, SSDs, and flash-based embedded storage for computing devices, mobile phones, tablets, and wearable technology.

[1] Valuation Looks High

This table highlights how WDC is valued vs broader market. For more details see: WDC Valuation Ratios

[2] Growth Is Very Strong

• Western Digital has seen its top line grow at an average rate of 7.5% over the last 3 years
• Its revenues have grown 28% from $8.4 Bil to $11 Bil in the last 12 months
• Also, its quarterly revenues grew 25.2% to $3.0 Bil in the most recent quarter from $2.4 Bil a year ago.

This table highlights how WDC is growing vs broader market. For more details see: WDC Revenue Comparison

[3] Profitability Appears Very Strong

• WDC last 12 month operating income was $3.0 Bil representing operating margin of 27.9%
• With cash flow margin of 24.9%, it generated nearly $2.7 Bil in operating cash flow over this period
• For the same period, WDC generated nearly $3.8 Bil in net income, suggesting net margin of about 35.4%

This table highlights how WDC profitability vs broader market. For more details see: WDC Operating Income Comparison

[4] Financial Stability Looks Very Strong

• WDC Debt was $4.7 Bil at the end of the most recent quarter, while its current Market Cap is $85 Bil. This implies Debt-to-Equity Ratio of 5.5%
• WDC Cash (including cash equivalents) makes up $4.0 Bil of $16 Bil in total Assets. This yields a Cash-to-Assets Ratio of 25.9%

[5] Downturn Resilience Is Weak

WDC has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• WDC stock fell 60.9% from a high of $77.17 on 4 June 2021 to $30.21 on 28 December 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 29 May 2024
• Since then, the stock increased to a high of $279.70 on 28 January 2026 , and currently trades at $250.23

 
2020 Covid Pandemic

• WDC stock fell 58.8% from a high of $70.93 on 23 January 2020 to $29.19 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 1 March 2021

 
2008 Global Financial Crisis

• WDC stock fell 75.2% from a high of $39.98 on 5 June 2008 to $9.93 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 16 December 2009

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read WDC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.