Western Digital Stock Slips on Another Low Forecast, Analysts Blame NAND Weakness By Investing.com

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© Reuters. Western Digital (WDC) Stock Slips Another Low Forecast, Analysts Blame NAND Weakness

By Senad Karaahmetovic

Shares of Western Digital Corporation (NASDAQ:) are down about 4.5% pre-opening on Wednesday after the company reported worse-than-expected FQ2 results and offered a soft forecast for this quarter.

Western reported revenue of $0.42 on revenue of $3.11 billion, which compares with an expected loss per share of $0.14 on sales of $2.99 ​​billion. Adjusted gross margin was 17.4%, below the estimate of 20.9%.

For this quarter, Western expects to post a loss per share in the range of $1.70 to $1.40 on revenue of $2.6 billion to $2.8 billion. Analysts were looking for a loss per share of $0.32 on revenue of $3.12 billion.

Additionally, the memory maker announced that it sold $900 million worth of convertible preferred stock to Apollo Global Management (NYSE:) and Elliott Investment Management. The agreed initial conversion price is $47.75. In addition, both companies won seats on the board of directors.

“We see substantial opportunity and value creation ahead for Western Digital and are excited to make this investment, which allows Western Digital to continue to execute on its innovation-driven strategy and produce industry-leading products. market for its clients. We look forward to working with David and the Board of Directors as they position the company for long-term success,” said Apollo Global Management.

Goldman Sachs analysts said Western made much-needed NAND supply cuts. Nevertheless, the short-term trade outlook remains challenging.

While we appreciate the steps taken by management to improve the company’s liquidity position (i.e. issuance of approximately $900 million of preferred convertible stock, reduction of inventory), We maintain our cautious investment thesis on WDC as we expect macroeconomic headwinds, particularly from the consumer and client side. -markets are weighing on short-term margins, EPS and FCF, they said in a note.

UBS analysts added that Western continues to be negatively affected by NAND weakness.

Our thesis on WDC remains unchanged so that absent the scenario where WDC figures out how to somehow consolidate the JV with Kioxia, we continue to dislike its NAND business which tends to weigh on profitability of the overall business, they wrote in a client note.

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