Wells Fargo Slashes Western Digital Estimates On Tough 2019 Projection

While the third and fourth quarters of this year could be difficult for Western Digital Corp WDC, concerns about the company's balance sheet appear overblown, according to Wells Fargo.

The Analyst

Wells Fargo’s Aaron Rakers maintained an Outperform rating on Western Digital with an unchanged $65 price target. 

The Thesis

Apart from NAND flash price declines, there are indications of a continued buildup of industry inventory, Rakers said in a Wednesday note.

Cloud-driven nearline HDD demand seems to be going through a multiquarter slowdown, the analyst said. 

Western Digital’s performance could bottom in Q3 and Q4, and investors may look for signs of improvement in the first half of fiscal 2020, Rakers said. 

A rebalancing of NAND flash supply and demand could come amid capacity growth reductions and a recovery in cloud-driven nearline HDDs.

Wells Fargo lowered its Q2 revenue and EPS estimates from $4.34 billion to $4.155 billion and from $1.57 to $1.45, respectively.

Revenue and EPS estimates for Q3 were slashed from $4.2 billion to $3.63 billion and from $1.38 to 53 cents, respectively.

The firm's Q4 revenue and EPS estimates were cut $4.19 billion to $3.74 billion and from $1.43 to 64 cents, respectively.

Price Action

Western Digital shares were down 4.02 percent at $36.31 at the time of publication Thursday. 

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