Western Digital, Misunderstood Merger With Significant Upside And Limited Downside
Alex Zhao, CFA • 40 Comments
Alex Zhao, CFA • 40 Comments
The Street's Upcoming Affair With SanDisk
Today, 4:17 PM
Yesterday, 5:35 PM
- ACTG, AFL, AIV, AJG, ALDW, ALGN, ALJ, AMZN, ARII, ATEN, ATR, AUY, BCOV, BGS, BIDU, BOOM, BRKS, CAA, CATM, CBL, CBS, CENX, CHMT, CLD, CLMS, COLM, COWN, CPHD, CPT, CUBE, CWST, CY, DECK, DGI, DGII, DLR, DTLK, ECOL, EEP, EGO, EHTH, EIX, ELLI, EMN, EQC, ES, ESS, EXPE, EYES, FE, FET, FICO, FII, FIX, FLS, FPO, FR, FTNT, GIMO, GNMK, GOOG, HIG, HLS, IM, INVA, INVN, ISIL, ITGR, IXYS, KAMN, KBR, KLAC, KRG, LEG, LMNX, LPLA, LYV, MATW, MOBL, MSCC, MSTR, MTD, N, NGVC, NR, NSR, OMCL, OUTR, PCCC, PDFS, PFG, PXLW, QGEN, QSII, RGA, RMD, ROVI, RSG, RTEC, SB, SBAC, SKYW, SNMX, SPNC, SRCL, STMP, STRZA, SYNA, TCO, TFSL, THG, TLGT, TNDM, UCTT, ULH, VCRA, VDSI, VRSN, WDC, WLK, WRI, WYNN, YRCW
Tue, Jul. 19, 3:39 AM
- Scientists reveal method for storing rewritable digital data at record density.
- Involves rearranging individual chlorine atoms on a sheet of copper.
- Provides roughly 100x more data per square inch than the world's most efficient hard drive.
- Could write the entire contents of the Library of Congress in a space smaller than a dust mite.
- Key challenge is speed.
- Source links: Nature, Popular Mechanics
- Also see Richard Feynman's There's Plenty of Room at the Bottom lecture
- Disk drive stocks: OTCPK:CBEX, EMC, HILL, HTCH, IBM, IMN, IVAC, NTAP, QBAK, SXCL, SMIT, STX, VECO, WDC
Thu, Jul. 7, 11:05 AM
- A boost in guidance from Western Digital (WDC +4.1%) is helping to lift some other chip stocks.
- The strong read-through on NAND chip sales have stoked some buying action on Micron (MU +5.1%), Seagate Technology (STX +1.7%), and Applied Materials (AMAT +1.2%) on optimism that NAND pricing will hold up in the second half of the year.
- Previously: Western Digital higher after hours on lift in guidance; CFO to exit (July 6)
Thu, Jul. 7, 9:16 AM
Wed, Jul. 6, 5:39 PM
Wed, Jul. 6, 4:25 PM
- CFO Olivier Leonetti is leaving the company, effective Sept 1, to pursue other opportunities. Current EVP, finance, and Chief Strategy Officer Mark Long will take over his duties.
- Reflecting the ownership of SanDisk, WDC now expects FQ4 revenue to be about $3.46B, up from an earlier forecast of $3.35-$3.45B. Q4 EPS is seen at $0.72 vs. previous $0.65-$0.70. Non-GAAP gross margin is expected at 31%, flat from previous guidance.
- Shares +4.5% after hours
Mon, Jun. 27, 3:00 PM
Thu, Jun. 9, 8:56 AM
- Global PC shipments this year are expected to fall 7.3%, according to IDC, roughly 200 basis points worse than the group's previous forecast. This cut comes after Q1 shipments fell 12.5% Y/Y vs. the anticipated 11.3% decline.
- "The latest update reflects continuing pressure on PC shipments, but does not significantly change the factors driving the market," says IDC's Loren Loverde, adding that with an unprecedented four straight quarters of double-digit volume declines, the bar has been lowered for some improvement going forward.
- Tickers of interest: INTC, MSFT, OTCPK:LNVGY, NVDA, AMD, MU, STX, WDC
Tue, Jun. 7, 12:24 PM
- Believing NAND flash demand will improve in 2H16 and that hard drive sales will see a modest rebound, Mizuho's Vijay Rakesh has upgraded Western Digital (WDC +3.4%) to Buy, and hiked his target by $13 to $53. Archrival Seagate (STX +2.4%) is following Western higher on a day the Nasdaq is nearly flat.
- Rakesh: "While WDC should give more FY17E details on its July 1 call, we have modeled weaker 2H GMs, weaker Samsung licensing, and see a mostly in-line 2H16 which would be a big change from the significant downside of the last four quarters." He's still worried about NAND flash share losses caused by 3D NAND delays at SanDisk, and notes sales of 10K/15K-RPM enterprise hard drives remain weak.
- Barclays and Cowen upgraded Western in late May, shortly before the company issued revised guidance that took the recently-closed SanDisk acquisition into account.
Thu, May 26, 5:33 PM
- With the SanDisk acquisition on the books as of May 12, Western Digital (NASDAQ:WDC) now expects FQ4 (calendar Q2) revenue of $3.35B-$3.4B, up from a prior $2.6B-$2.7B. EPS guidance has been cut to $0.65-$0.70 from $1.00-$1.10, thanks partly to $220M in interest costs ($185M from newly-issued debt related to the SanDisk deal).
- Due to the equity issued in the SanDisk deal, FQ4 diluted share count is expected to be 266M, and equivalent to 290M on a full-quarter basis (i.e. if SanDisk was on the books for the whole quarter). This compared with an FQ3 diluted share count of 234M.
- WDC -0.9% after hours to $44.00. Shares are still up 11% on the week, thanks in large part to upgrades from Barclays and Cowen. Western has updated its quarterly factsheet (.pdf) to reflect its new guidance.
Wed, May 25, 10:54 AM
- Barclays' Mark Moskowitz has upgraded Western Digital (WDC +5.8%) to Overweight, and upped his target by $3 to $60. He argues the valuation is too low, that hard drives still have a future, and that multiples can grow as Western brings 3D NAND products to market (via just-acquired SanDisk) and lowers its debt load.
- The call comes a day after Cowen's Karl Ackerman upgraded to Outperform, while asserting the guidance Western is due to provide on Thursday "should help eliminate uncertainty" related to the SanDisk acquisition. He also cited low expectations, and declared SanDisk will help Western better serve enterprise and hyperscale (cloud data center) clients.
- Seagate (STX +3.4%) is following Western higher. Both companies were hammered in late April in response to weak earnings and guidance. Western is up 13% on the week.
- Now read Western Digital: Time To Be Optimistic
Mon, May 23, 12:39 PM
- "Politics is now a topic in every client discussion," say David Kostin and team, and the nature of today's electorate nearly assures a close race, even though prediction markets currently assign a high probability of a Clinton victory.
- When uncertainty rises, consumer staples (NYSEARCA:XLP) typically outperforms, while tech (NYSEARCA:XLK) lags.
- Getting down to names, with protectionism and tax policy two key areas of debate, buy those stocks with high U.S. sales and high effective tax rates, and avoid those with high foreign sales and low tax rates.
- High U.S. sales and high tax rates (buy): Cardinal Health (NYSE:CAH), Fidelity National (NYSE:FIS), Discover (NYSE:DFS), AmerisourceBergen (NYSE:ABC), Schwab (NYSE:SCHW), ADP (NASDAQ:ADP), Chipotle (NYSE:CMG), Reynolds America (NYSE:RAI), Express Scripts (NASDAQ:ESRX), Alliance Data (NYSE:ADS), Fiserv (NASDAQ:FISV), Paychex (NASDAQ:PAYX), Whole Foods (NASDAQ:WFM), Akamai (NASDAQ:AKAM), Intuit (NASDAQ:INTU), Southwest Airlines (NYSE:LUV).
- High foreign sales and low tax rates (avoid): Abbott Labs (NYSE:ABT), Agilent (NYSE:A), Mondelez (NASDAQ:MDLZ), XL Group (NYSE:XL), Waters (NYSE:WAT), Priceline (NASDAQ:PCLN), Transocean (NYSE:RIG), PerkinElmer (NYSE:PKI), Nvidia (NASDAQ:NVDA), Lam Research (NASDAQ:LRCX), Western Digital (NASDAQ:WDC).
Thu, May 12, 10:03 AM
- With the final approval in place from China's Ministry of Commerce, Western Digital (WDC +0.2%) today has closed on its acquisition of SanDisk (NASDAQ:SNDK).
- Debt financing has been consummated and funds released from escrow. SanDisk owners receive $67.50 in cash and 0.2387 shares of Western Digital for each of their SanDisk shares; SNDK closed yesterday at $76.18.
- The deal had previously cleared hurdles in the U.S., EU, Singapore, Japan, Taiwan, South Korea, South Africa and Turkey.
- Integration begins immediately with Steve Milligan continuing as CEO of Western Digital, while SanDisk co-founder, President and CEO Sanjay Mehrotra will join the WDC board.
- Now read Western Digital Stock Is A Contrarian Value Play »
Tue, May 10, 5:53 PM
- Alaska Air Group (NYSE:ALK) has moved up another 1% after hours on news that it's headed to the S&P 500, replacing SanDisk (SNDK +1.4%), which is set to be acquired by Western Digital on Thursday.
- Correspondingly, Texas Roadhouse (NASDAQ:TXRH) has gained 1.3% postmarket as it leaves the SmallCap 600 to replace Alaska Air Group in the MidCap 400, and Cavco Industries (NASDAQ:CVCO) has jumped 7.3% as it heads into the SmallCap 600 to replace Texas Roadhouse.
- The moves are set after the close of trading on Thursday, to coincide with the closure of the SanDisk acquisition.
- Now read A Strong Quarter For Alaska Bodes Well For The Virgin America Acquisition »
Tue, May 10, 8:24 AM| Tue, May 10, 8:24 AM | 7 Comments
Western Digital Corp. engages in the development, manufacture, and provision of data storage solutions. Its product portfolio includes hard disk drives and solid-state drives (SSD) marketed under the HGST, WD, and G-Technology brands. It also offers mobile drives for the notebook, PC, and gaming... More
Industry: Data Storage Devices
Country: United States
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