Is Western Digital a Buy?
Even among risk-taking technology investors, memory and storage stocks aren't for the faint of heart. Memory and storage producers are "price-takers," meaning that they don't have control over the price at which they sell their products, which is determined by supply and demand. Suppliers must also produce output in a relative "straight line" in tune with what they believe to be long-term demand. Yet as we saw last year, demand can fluctuate wildly in the near-term, especially with the onset of the U.S.-China trade war.
Western Digital (NASDAQ: WDC), which makes both hard disk drives and NAND flash storage chips, has felt these effects in a big way, with big-time declines in its NAND flash segment over the past year. NAND prices are down roughly 80% over the past two years, which led to significant declines in Western Digital's revenue, causing adjusted (non-GAAP) profits to plummet to near-breakeven levels.
However, the storage industry is currently thought to be past the bottom of the cycle, and expectations were high for Western Digital's forward guidance to show a recovery when it released its earnings report on Oct. 30. Yet management only guided for adjusted earnings of $0.45 to $0.65 in the coming quarter, versus analyst expectations of $0.75.
Source Fool.com
