Western Digital (WDC) Stock Falls on Negative Analyst Note

NEW YORK (TheStreet) -- Shares of Western Digital Corp.  (WDC) are declining, down 1.76% to $82.96, after Jefferies lowered its price target to $116 from $123 while maintaining its "buy" rating.

The firm lowered its price target as the enterprise storage market declines worse than expected and the PC market weakens further.

"Western Digital's SSD (Solid-State Drives) growth decelerates, and web 2.0 build-outs and capacity additions are weaker than expected," Jefferies analysts said.

Additionally, PC HDD (Hard Disk Drives) shipments decline due to weakening PCs and SSD penetration increases in notebooks, Jefferies noted.

Western Digital is a data storage solutions company that provides data storage solutions to enable consumers, businesses, governments and other organizations to create, manage, experience and preserve digital content.

Separately, TheStreet Ratings team rates WESTERN DIGITAL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WESTERN DIGITAL CORP (WDC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WESTERN DIGITAL CORP has improved earnings per share by 5.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WESTERN DIGITAL CORP increased its bottom line by earning $6.69 versus $3.90 in the prior year. This year, the market expects an improvement in earnings ($7.82 versus $6.69).
  • Although WDC's debt-to-equity ratio of 0.25 is very low, it is currently higher than that of the industry average. To add to this, WDC has a quick ratio of 2.09, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Computers & Peripherals industry and the overall market on the basis of return on equity, WESTERN DIGITAL CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 37.10% is the gross profit margin for WESTERN DIGITAL CORP which we consider to be strong. Regardless of WDC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WDC's net profit margin of 10.81% is significantly lower than the industry average.
  • You can view the full analysis from the report here: WDC Ratings Report

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