Barclays Recommends Investors Initiate Or Add To Positions In Western Digital

Western Digital Corp WDC preannounced healthy September-quarter numbers, while indicating that it would provide more details on its financial metrics during its late October earnings call. This commentary “is a positive development for investor sentiment,” Barclays’ Mark Moskowitz said in a report.

Analyst Moskowitz maintains an Overweight rating on Western Digital, with a price target from $34 to $29.

Previously, Western Digital had indicated that it would not be discussing segment margin and other long-term metrics until December, which resulted in investor concerns over the company’s model. “Now, there is potential for more goodness after today's event, in our view, which should help the stock,” Moskowitz stated.

Positive Update

Western Digital raised its projection of the September-quarter revenue from $4.4-$4.5billion to $4.45-$4.55 billion. The guidance for non-GAAP gross margin has been raised from 32 percent to approximately 33 percent. OpEx target has been raised from $875 million to $905 million, driven by higher incentive comps. The non-GAAP EPS projection has gone up from $0.85-$0.90 to $1.00-$1.05.

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Western Digital indicated that favorable mix in both HDD and SSD had helped its results, along with favorable pricing conditions. “We think that this commentary should allay some investors' fears that industry discipline could not be sustained,” the analyst commented.

Moskowitz raised the EPS estimate for FY1 from $4.33 to $4.68. He added, “We recommend investors build or add to positions.”

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