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
Sep. 8, 2015, 12:10 PM
- JPMorgan has upgraded SanDisk (SNDK +4.6%) and Microchip (MCHP +7.7%) to Overweight, Baird has upgraded ON Semi (ON +7.7%) to Outperform, and Susquehanna has launched coverage on Silicon Motion (SIMO +4.2%) at Positive. All four names are outperforming on a day the Nasdaq is up 1.8%, and the Philadelphia Semi Index 3.2%.
- JPMorgan thinks SanDisk has addressed the execution issues that have weighed on enterprise flash sales, and is poised to once more see positive enterprise and client/embedded growth. It forecasts the enterprise SSD market will see a ~20% CAGR over the next few years.
- Regarding Microchip, JPMorgan believes shipments will soon match end-market consumption, after having come in below consumption the last 3 quarters. It also expects Microchip's microcontroller (MCU) product line to drive above-market growth.
- Update: Microchip has favorably adjusted its FQ2 guidance today.
Aug. 31, 2015, 11:39 AM
- SanDisk (NASDAQ:SNDK) has received a lift from vague rumors that it has hired a bank after receiving a buyout offer. Speculation regarding potential buyers once more centers around Seagate and Western Digital, who have made a slew of smaller flash-related purchases as SSDs continue taking share from hard drives.
- SanDisk also rose in April on speculation Western could make a bid. Shares are down 44% YTD, and trade for just 9.6x 2014 EPS of $5.60. The 2015 EPS consensus is at $3.13, and the 2016 consensus at $4.32.
- Separately, SanDisk has announced (at VMware's VMworld conference) a new version of its FlashSoft enterprise SSD caching software that integrates with VMware's vSphere 6 server virtualization platform, and reference architectures for VMware's VSAN storage virtualization platform that leverage SanDisk's SSDs and Fusion-io PCIe flash modules.
Aug. 26, 2015, 4:21 PM
- The Nasdaq has closed its latest ultra-volatile day up 4.2%. Chip stocks, hit hard in recent weeks amid China/inventory concerns, were among the standouts (SOXX +5%) during the rally: Big gainers included Nvidia (NVDA +7.5%), Skyworks (SWKS +6.9%), Qorvo (QRVO +5.9%), Xilinx (XLNX +6.3%), Analog Devices (ADI +7.1%), Linear (LLTC +6.1%), SanDisk (SNDK +7.4%), ON Semi (ON +6.2%), and Cavium (CAVM +5.6%).
- Cybersecurity plays and various other enterprise tech names also did well. Standouts included HP (HPQ +5.5%), Palo Alto Networks (PANW +6%), Rackspace (RAX +9.8%), Red Hat (RHT +5.9%), KEYW (KEYW +8.1%), Brocade (BRCD +5.6%), ShoreTel (SHOR +5.7%), Violin Memory (VMEM +14.7%), and Rapid7 (RPD +7.2%).
- In addition to HP, tech large-caps turning in big gains included Apple (AAPL +5.7%) Microsoft (MSFT +5.5%), Google (GOOG +7.7%), and Intel (INTC +5.5%). Google benefited from a Goldman upgrade.
- KEYW announced a CEO change yesterday afternoon. HP and Brocade are adding to last week's post-earnings gains. Skyworks/Qorvo peer Avago has posted an FQ3 beat after the close.
Aug. 18, 2015, 9:16 AM
- Less than a month after upgrading SanDisk (NASDAQ:SNDK) to Buy in response to its Q2 beat and in-line guidance, BofA/Merrill has issued a two-notch downgrade to Underperform.
- The firm argues recent memory industry capex hikes suggest a lack of discipline - Micron (NASDAQ:MU) recently set a higher-than-expected FY16 (ends Aug. '16) capex budget of $5.3B-$5.8B, and SK Hynix (OTC:HXSCF) stated yesterday it's considering making $39B worth of new fab investments.
- BofA also points points out recent memory spot price corrections indicate major players continue to compete aggressively, in spite of industry consolidation.
- SanDisk has dropped to $56.37 premarket. The 52-week low is $53.18.
Aug. 17, 2015, 5:37 PM
Aug. 12, 2015, 4:42 PM
- In compliance with the company's mandatory retirement-age policy for directors, Tom Pardun, 71, is stepping down from Western Digital's (NASDAQ:WDC) board following its November annual meeting. Pardun has been chairman for 10 years of Western's history, via two separate terms.
- Former chairman/CEO Matt Massengill, 54, will replace Pardun. In addition, Len Leuer, the CEO printer maker Memjet, will become lead independent director.
Aug. 4, 2015, 5:53 PM
- Western Digital (NASDAQ:WDC) declares $0.50/share quarterly dividend, in line with previous.
- Forward yield 2.37%
- Payable Oct. 15; for shareholders of record Oct. 2; ex-div Sept. 30.
Aug. 4, 2015, 1:15 PM
- SanDisk (SNDK -0.6%) and NAND flash manufacturing partner Toshiba (OTCPK:TOSBF) have begun pilot production of their first 3D NAND chips. The companies have also unveiled a 256Gb (32GB), tri-level cell (X3), 48-layer, 3D NAND chip expected to begin shipping in 2016. They announced a 128Gb, 2-bit-per-cell, chip in March.
- SanDisk/Toshiba proclaim their 48-layer 3D NAND technology (called BiCS) will deliver superior density and performance, and also yield better write/erase endurance and energy efficiency than 2D NAND. During its Q2 call (transcript), SanDisk stated it expected 3D NAND to account for 15%-20% of industry production by the end of 2016, with SanDisk's output towards the low end of that range.
- Samsung is the early leader in mass-producing 3D NAND, via 32-layer chips. The company's 3rd-gen 3D NAND solution (called V-NAND) is expected to ramp in 2H15. Meanwhile, Intel and Micron showed off a 384Gb tri-level 3D NAND chip in March, which claiming a cost/efficiency edge. More recently, they unveiled 3D XPoint, a next-gen memory technology declared to be up to 1,000 times faster than NAND, and 10x denser than DRAM. Its price and performance are both said to be between NAND and DRAM.
- Separately, SanDisk has extended its IP licensing deal with NAND rival SK Hynix (OTC:HXSCF) to 2023; Hynix will make license and royalty payments over the deal's lifetime. The companies have also settled a trade secret theft suit filed by SanDisk against Hynix, and struck a deal to have Hynix supply DRAM for SanDisk products.
Jul. 30, 2015, 9:12 AM
- Gainers: UNXL +33%. UNIS +22%. MEET +18%. GEVO +17%. SHOP +15%. OTEX +15%. WWE +15%. SGYP +13%. SKX +12%. MWW +9%. HBP +8%. HOLX +8%. WDC +8%. APD +6%.
- Losers: PRSN -35%. LNCO -21%. LINE -19%. FMI -18%. SSYS -18%. ITG -14%. FOE -13%. WFM -12%. QRVO -12%. OSK -11%. LOCK -11%. DDD -9%. MNKD -7%. NCR -6%. GNCA -6%. FMS -5%. MPC -5%. CROX -5%.
Jul. 29, 2015, 6:39 PM
- Western Digital (NASDAQ:WDC) has guided on its FQ4 call for FQ1 revenue of $3.2B-$3.3B and EPS of $1.50-$1.60, below a consensus of $3.5B and $1.76. However, a light outlook was expected following Seagate's warning and a deluge of soft PC data.
- Western has risen to $83.11 AH. Seagate (NASDAQ:STX) has risen to $50.74 ahead of Friday morning's FQ4 report.
- Western's FQ4 results, PR
Jul. 29, 2015, 4:16 PM
- Western Digital (NASDAQ:WDC): FQ4 EPS of $1.51 beats by $0.06.
- Revenue of $3.2B (-12.3% Y/Y) misses by $50M.
Jul. 23, 2015, 1:40 PM
- Micron (MU +3.7%), Skyworks (SWKS +3.2%), Qorvo (QRVO +1.2%), and Avago (AVGO +1.9%) are recovering some of the Wednesday losses seen in response to Apple's FQ3 iPhone sales print and FQ4 guidance. The Nasdaq is down 0.4%.
- The gains come after Apple-dependent Cirrus Logic (CRUS +19.8%) beat FQ1 estimates and provided strong FQ2 guidance, and beaten-down NAND flash giant SanDisk (SNDK +17.5%) delivered a Q2 beat and offered (better than feared) in-line guidance. Micron received 35% of its May quarter revenue from NAND.
- The numbers are overshadowing Qualcomm's soft FQ4 guidance, blamed to a large extent on iPhone share gains and the lack of a Galaxy S6 app processor design win.
- Stifel's Tore Svanberg has upgraded Cirrus to Buy, while asserting the audio codec developer is "entering a significant product cycle over the next 12-24 months." He's upbeat about the launch of 55nm codecs (expected to provide cost savings), and sees evidence of further traction with top Android OEMs.
- Oppenheimer (Perform rating) estimates Cirrus will (thanks to a smart codec design win) get over $3+ per iPhone 6S unit compared with ~$2.15 per iPhone 6, and notes another smart codec win with a top-tier OEM will ramp over the next 2 quarters. Apple was 62% of FQ1 revenue vs. 65% in FQ4; Samsung (lifted by a Galaxy S6 win) was 18%.
- BofA/Merrill has upgraded SanDisk to Buy. Pac Crest's Monica Garg (Outperform) notes Q2 retail and enterprise sales were both better than expected, as was an ASP decline of 6%. She's also pleased a client SSD delayed by qualification issues will begin shipping in Q4, and asserts SanDisk has both the best planar NAND technology and the industry's first 48-layer 3D NAND chips. Bernstein is also upbeat.
- Skyworks reports after the bell. Various analysts have defended Skyworks, Avago, and Qorvo following Apple's numbers, asserting 4G growth/greater RF complexity remains a tailwind. Oppenheimer estimates Skyworks will see a "15%-20% content boost" with the iPhone 6S, and Avago a more modest gain.
- Prior Cirrus coverage. Prior SanDisk coverage.
Jul. 23, 2015, 12:44 PM
Jul. 23, 2015, 10:25 AM
- Believing cloud data center spending growth is slowing, Morgan Stanley's Katy Huberty has downgraded Seagate (STX -1.1%) to Underweight, and Western Digital (WDC -1.3%) and QLogic (QLGC -0.7%) to Equal Weight.
- Regarding Seagate (recently issued a calendar Q2 warning thanks to PC weakness), Huberty estimates cloud-related sales account for as much as 12% of revenue, and a larger % of gross profit. Her FY16 (ends June '16) revenue and EPS estimates are now respectively 6% and 20% below consensus.
- Huberty sees similar challenges for Western, albeit while adding its (M&A-fueled) flash product investments will partly offset. Her FY16 (ends June '16) gross margin estimate has been cut to 28.7% from 31%.
- As for QLogic (also recently warned), the company's core Fibre Channel/Ethernet connectivity market is expected to see "normal to below normal seasonality." She now expects revenue to drop 3% Y/Y in 2015.
- Huberty's cloud spending remarks come after Google reported its capex (growing rapidly in recent years) fell 5% Y/Y in Q2 to $2.52B. Western reports on July 29, QLogic on July 30, and Seagate on July 31.
Jul. 23, 2015, 9:15 AM
Jul. 22, 2015, 5:49 PM
- SanDisk (NASDAQ:SNDK) has used its Q2 CC to reiterate full-year revenue guidance of $5.4B-$5.7B (consensus is at $5.53B). That's going over well in light of the company's 1H15 woes.
- Also going over well: Q3 revenue guidance is at $1.35B-$1.45B, in-line with a $1.41B consensus.
- Shares are now at $61.27 in AH trading. They're still down 37% YTD.
- Q2 results, details
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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