Western Digital late Friday disclosed adjustments to the company’s debt covenants, Wells Fargo analyst Aaron Rakers tells investors in a research note. The analyst views the announcement as a negative. The news, while providing greater debt covenant flexibility, will likely be viewed as reflecting a "deeper / longer" NAND Flash down-cycle amid ongoing weak nearline demand dynamics, says the analyst. He says Western Digital’s debt covenant leverage ratio increases from the prior 3.25 times to 3.75 times for Q1 of 2023, 4.75 times through Q2, 5.0 times through Q3 and 4.75 times in Q4. Rakers has an Overweight rating on Western Digital with a $55 price target.
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