A 'Down Cycle' Is Coming For Data Storage Stocks; A Bearish Analyst Is Not Sugar Coating His Reasons

Benchmark analyst Mark Miller reiterated a Sell on Western Digital Corp WDC and a $34 price target citing concerns over the strength and duration of the down cycle and weakening hyperscale.
At an investor conference, Western Digital management indicated preparing for a down cycle driven by demand.
NAND bit supply is currently exceeding demand, likely to grow around 20%.
Inventory adjustments are underway, he noted. Supply and demand affected the flash margins the most.
Management hoped for better visibility by next quarter. Since the last earnings call, things have gotten somewhat more challenging, he observed.
Consistent with Seagate Technology Holdings PLC's STX view, hyperscale customers became more cautious.
Miller found Western Digital in a much stronger position to face a down cycle than the last, thanks to lower debt, greater access to capital, and a better mix.
The firm is managing discretionary spending, slowing nodal transitions and capacity growth, he added.
Miller downgraded WDC to Sell from Hold with a $34 price target just a week ago, citing cloud customer concerns and Asain economic trends.
Miller noted that Seagate joined the likes of Micron Technology, Inc MU and Nvidia Corp (NASDAQ: NVDA) in lowering outlooks. The analyst also downgraded Seagate to Hold from Buy.
Price Action: WDC shares closed higher by 2.32% at $42.41 on Thursday.
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