Standpoint Research Upgrades Western Digital Corp. (WDC) to Buy
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Price: $539.00 -9.92%
Rating Summary:
34 Buy, 16 Hold, 1 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 0 | Down: 0 | New: 2
Rating Summary:
34 Buy, 16 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 0 | Down: 0 | New: 2
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Standpoint Research upgraded Western Digital Corp. (NASDAQ: WDC) from Hold to Buy with a price target of $48.00.
Analyst Ronnie Moas comments, "We downgraded WDC four weeks ago as it had gotten ahead of itself and was within 6% of our $48 price target for next year. The shares have dropped 12% and underperformed the S&P-500 by 1500 bps since our downgrade. The market over-reacted to a cut in revenue guidance. In my opinion, even if WDC delivers $8.00 and not the $10.00 in EPS they are forecasting the shares are still undervalued by 20%. In a worst case scenario I see WDC earning $8.00 in 2014 and I would attach a 6X multiple to that in order to justify the $48 target for next year. Yes, there is some uncertainty regarding PC sales and volatilty in this industry, but any shortfall on top of what is expected can be offset by the (same day) news regarding a new capital allocation strategy at WDC. The company announced plans to start paying a quarterly dividend of $0.25 cents a share, for an annual payout of $1.00/share, and a yield of about 2.6%. Western Digital also boosted its share repurchase authorization by $1.5 billion (or 15% of its market capitalization). The list of value traps in this sector is quite long but at 4X company EPS forecasts, this stock seems like a good risk/reward. The weak economy, shift to flash storage, and estimate cut by 10% on hard disk drives appears to be more than priced in at this time. Western Digital now sees revenue for the quarter at $3.9 billion, down from previous guidance of $4.3 billion. The company continues to see non-GAAP gross margins at ~ 30%... WDC reiterated its target $10.00 in EPS for FY 2013. The warning from WDC was in line with other comments on PC demand from INTC, HPQ and DELL, to name a few."
For an analyst ratings summary and ratings history on Western Digital Corp. click here. For more ratings news on Western Digital Corp. click here.
Shares of Western Digital Corp. closed at $39.48 yesterday.
Analyst Ronnie Moas comments, "We downgraded WDC four weeks ago as it had gotten ahead of itself and was within 6% of our $48 price target for next year. The shares have dropped 12% and underperformed the S&P-500 by 1500 bps since our downgrade. The market over-reacted to a cut in revenue guidance. In my opinion, even if WDC delivers $8.00 and not the $10.00 in EPS they are forecasting the shares are still undervalued by 20%. In a worst case scenario I see WDC earning $8.00 in 2014 and I would attach a 6X multiple to that in order to justify the $48 target for next year. Yes, there is some uncertainty regarding PC sales and volatilty in this industry, but any shortfall on top of what is expected can be offset by the (same day) news regarding a new capital allocation strategy at WDC. The company announced plans to start paying a quarterly dividend of $0.25 cents a share, for an annual payout of $1.00/share, and a yield of about 2.6%. Western Digital also boosted its share repurchase authorization by $1.5 billion (or 15% of its market capitalization). The list of value traps in this sector is quite long but at 4X company EPS forecasts, this stock seems like a good risk/reward. The weak economy, shift to flash storage, and estimate cut by 10% on hard disk drives appears to be more than priced in at this time. Western Digital now sees revenue for the quarter at $3.9 billion, down from previous guidance of $4.3 billion. The company continues to see non-GAAP gross margins at ~ 30%... WDC reiterated its target $10.00 in EPS for FY 2013. The warning from WDC was in line with other comments on PC demand from INTC, HPQ and DELL, to name a few."
For an analyst ratings summary and ratings history on Western Digital Corp. click here. For more ratings news on Western Digital Corp. click here.
Shares of Western Digital Corp. closed at $39.48 yesterday.
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