Western Digital rises whilst Benchmark cuts estimates over worries on NAND pricing

Western Digital (WDC) shares rose on Friday whilst funding agency Benchmark lower estimates for fiscal 2023 on worries over a deterioration in enterprise circumstances, rising inventories and decrease NAND pricing, following Micron’s (MU) fourth-quarter report and outlook.

Analyst Mark Miller, who has a promote score on Western Digital (WDC), lower his estimates for fiscal 2023 to be $1.70 per share in adjusted earnings on $14.4B in income, down from a previous outlook of $3.05 per share and $15.7B in gross sales. The analyst additionally lower estimates for the following two quarters.

“Throughout yesterday’s earnings name, Micron indicated enterprise circumstances stay weak and guided nicely beneath expectations for [first-quarter] with anticipated gross sales down 36% [quarter-over-quarter] and non-GAAP margins declining 1,430 [basis points] sequentially leading to an anticipated non-GAAP EPS vary of $0.04 + 0.10 versus the consensus expectation of $0.64,” Miller wrote in a observe to shoppers, including that pricing “was termed very aggressive.” And with stock days up 28% sequentially, it is more likely to be a difficult highway forward.

Western Digital (WDC) shares rose 2.5% to $32.98 in premarket buying and selling, whereas competitor Seagate Expertise (STX) was flat.

As well as, Miller famous that Western Digital (WDC) has considerations over money administration, has it has $2.33B in money and $7.34B in debt. With considerations that free money circulation could possibly be damaging in fiscal 2023, the scenario could get dicey.

Nonetheless, Western Digital (WDC) shares are buying and selling beneath ebook worth and Miller stated value-oriented buyers could look to them, however warning needs to be used “till we see indicators of enchancment in NAND pricing, better visibility on the path of the macro economic system and the money circulation, and enchancment or stabilization in earnings expectations.”

Earlier this month, Mizuho downgraded each Micron Expertise (MU) and Western Digital (WDC), citing current checks that confirmed “steepening worth declines” heading into the following quarter and the primary half of subsequent yr.