NEW YORK (TheStreet) -- Shares of Western Digital (WDC) - Get Report were gaining 11.1% to $77.05 on Wednesday following that announcement that Unisplendour will take a 15% equity stake in the hard drive maker.
The Chinese technology company will make a $3.775 billion equity investment in Western Digital as part of the investment agreement. Western Digital will issue new shares to Unisplendor at a price of $92.50 a share under the terms of the investment.
Unispendour will have the right to nominate one representative to the Western Digital board of directors after making the investment, and will be subject to a five-year position standstill and voting restrictions.
"The equity investment by Unisplendour will help facilitate our growth as we look to capitalize on the many opportunities and changes within the global storage industry," Western Digital President and CEO Steve Milligan said in a statement.
About 3.2 million shares of Western Digital were traded by 9:53 a.m. Wednesday, above the company's average trading volume of about 2.7 million shares a day.
TheStreet Ratings team rates WESTERN DIGITAL CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate WESTERN DIGITAL CORP (WDC) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Although WDC's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average. To add to this, WDC has a quick ratio of 2.10, which demonstrates the ability of the company to cover short-term liquidity needs.
- 36.98% is the gross profit margin for WESTERN DIGITAL CORP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, WDC's net profit margin of 6.89% significantly trails the industry average.
- Net operating cash flow has decreased to $488.00 million or 31.46% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Computers & Peripherals industry average. The net income has significantly decreased by 30.6% when compared to the same quarter one year ago, falling from $317.00 million to $220.00 million.
- You can view the full analysis from the report here: WDC