Western Digital’s 3Q Earnings Top Street Estimates; Shares Bounce 5.4%

Shares of Western Digital Corp. (WDC) were up 5.4% in extended trading on Thursday after the data storage company’s fiscal third quarter results topped estimates. The company reported revenues of $4.1 billion, a decline of 1% year-on-year but that still topped analysts’ estimates of $3.97 billion.

Non-GAAP EPS of $1.02 rose 20% year-on-year, beating consensus estimates of $0.68 per share.

Western Digital’s CEO, David Goeckeler said, “We reported solid results above the guidance range, driven by increasing momentum of our energy-assisted drives and our second-generation NVMe enterprise SSDs, improving NAND flash pricing trends, along with the continued accelerated digital transformation across end markets.”

In the fiscal third quarter, WDC’s 1% decline in revenues was a result of a fall in revenues for its Data Center Devices and Solutions business. However, the company observed a continued rise in demand for notebook and desktop personal computers (PCs) and new game consoles.  

For the fiscal fourth quarter, the company expects revenues to be in the range of $4.4 billion to $4.6 billion and expects gross margin to be between 29% and 31%. The company has forecast non-GAAP diluted EPS to land between $1.30 and $1.60. (See Western Digital Corp. stock analysis on TipRanks)

Following the earnings, Robert W. Baird analyst Tristan Gerra raised the price target from $85 to $100 and reiterated a Buy on the stock. Gerra commented on the results, “NAND gross margin of 30% in the reported quarter highlights a still-early stage in cyclical recovery. We continue to expect NAND pricing to increase in C2H.”

“Given the renewed execution, massive upcycle ahead characterized by strong demand and supply shortages, and NAND pricing on the cusp of a rebound, we see no reasons for WDC to not return to its prior EPS cycle peak,” Gerra added.

Overall, consensus among analysts is that WDC is a Strong Buy based on 13 Buys and 4 Holds. The average analyst price target of $85.06 implies upside potential of about 19.6% from current levels.

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