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WDC – Market expectations are for Uniform ROA to remain near historical lows, and management may have concerns about margins, demand, and end markets

January 20, 2021

  • Western Digital Corporation (WDC:USA) currently trades near recent averages relative to UAFRS-based (Uniform) earnings, with a 21.5x Uniform P/E. At these levels, the market has expectations for profitability to remain near historical lows, and management may have concerns about gross margins, NAND demand, and end market performance

  • Specifically, management may lack confidence in their ability to improve gross margins and continue attracting cloud customers, and they may have concerns about the sustainability of NAND and 18 terabyte product demand. Moreover, management may be exaggerating the potential of the ArmorLock self-storage business, customer capacity needs, and the strength of their Kioxia joint venture relationship. Furthermore, they may be concerned about their performance across various end markets and market shifts towards capacity enterprise, and they may be overstating the strength of retail