Resources

WDC – Market expectations are for improving Uniform ROA, but management may have concerns about SSD growth, their NAND business, and new products

June 7, 2021

  • Western Digital Corporation (WDC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 10.9x Uniform P/E. Even at these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about SSD growth, their NAND business, and new product launches
  • Specifically, management may lack confidence in their ability to sustain NVMe enterprise SSD growth, deliver further value for stakeholders, and continue paying down their debt obligations. Furthermore, they may have concerns about Client Device seasonality, the progress of pricing negotiations, and continued shortages in controllers. Additionally, they may be overstating the differentiators in their Flash business, the capabilities of their BiCS6 architecture, and the potential of their NAND technology investments. Moreover, management may be concerned about the sustainability of demand in NAND as well as their long road map on aerial density improvement. Finally, they may be exaggerating the current strength of their end-markets, and they may lack confidence in their ability to control their capex spend