S&P 500
7,514.60
+0.09%
Dow Jones
51,751.30
+0.30%
Nasdaq 100
30,512.60
+0.33%
Russell 2000
2,986.27
+0.36%
FTSE 100
10,442.20
+0.55%
Nikkei 225
73,356.70
+1.90%

Industrials

Western Digital Shares Hammered on Bad Karma (WDC, STX)

Photo of Paul Ausick
By Paul Ausick Published
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Thinkstock
Last night computer hard drive maker Western Digital Corp. (NYSE: WDC) reported third fiscal quarter revenues and earnings that easily beat pretty low expectations. The company posted revenues of $3.04 billion, up 35% year-over-year, and EPS of $2.52. Consensus estimates called for revenue of $2.48 billion and EPS of $1.59.

Western Digital even boosted its fourth quarter estimates to $4.2-$4.4 billion in revenue and EPS of $2.35-$2.55. The consensus estimates for the fourth quarter called for revenue of $4.05 billion and EPS of $2.30. So what is Western Digital’s stock getting pounded today? And, for that matter, why is Seagate Technology LLC (NASDAQ: STX) taking its lumps today as well?

It seems that there is some concern among analysts that the hard drive industry’s recovery from the Thai floods happened more quickly than most believed it could. That means that production will rise and prices will come under pressure as the drive makers have to find a market for all those drives. That’s the straightforward interpretation. But there’s a more complicated one as well.

Western Digital believes demand will reach 155-160 million units in the fourth quarter, a figure below a Street estimate of 170 million units. Thus sales prices will be soft because demand is lower. But Western Digital’s gross margin guidance for the fourth quarter is 30%-31%, considerably stronger than usual in the drive business.

Shares in Western Digital have fallen -15% today, to $37.49, ikn a 52-week range of $22.64-$44.44. Seagate’s shares are also down -5.2% at $29.46 in a 52-week range of $9.05-$31.39.

Paul Ausick

DISCLOSURE:
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA(www.finra.org)/SIPC(www.sipc.org). Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 30 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Other fees, such as exchange fees, may apply. Please view our fee disclosure to view a full listing of fees. Investing in alternative investments and/or strategies may not be suitable for all investors and involves unique risks, including the risk of loss. An investor should consider their individual circumstances and any investment information, such as a prospectus, prior to investing. Interval Funds are illiquid instruments, the ability to trade on your timeline may be restricted. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA(www.finra.org) /SIPC(www.sipc.org). There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire investment Before trading options please review the Characteristics and Risks of Standardized Options  Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement This should not be considered a recommendation to participate in IPOs and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation. New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For more information on the allocation process please visit IPO Allocation.
Follow 24/7 Wall St. on Google
Photo of Paul Ausick
About the Author Paul Ausick →

Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.

Featured Reads

Our top personal finance-related articles today. Your wallet will thank you later.

Lexington, KY Or Myrtle Beach, SC? Where Does A $1 Million Retirement Go Further?
Drew Wood |

Lexington, KY Or Myrtle Beach, SC? Where Does A $1 Million Retirement Go Further?
The Real Cost of Retiring in San Diego at 62 and Never Leaving the Coast
Michael Williams |

The Real Cost of Retiring in San Diego at 62 and Never Leaving the Coast

Continue Reading

Paul Ausick |

Western Digital Earnings Leap

ThinkstockWestern Digital Corp. (NASDAQ: WDC) reported fiscal first quarter 2013 results after markets closed today. For the quarter, the hard…

Paul Ausick |

Western Digital Re-starts Thai Plant Following Record Floods (WDC, STX, HPQ, DELL)

Disk drive maker Western Digital Corp. (NYSE: WDC) said yesterday that production at one of its plants in Thailand has…

Chris Lange |

Has Seagate Peaked?

Seagate Technology reported in-line second-quarter financials before the markets opened Monday morning.

Why Tech Investors Prefer Seagate Over Western Digital After Earnings
Paul Ausick |

Why Tech Investors Prefer Seagate Over Western Digital After Earnings

Disk drive makers Seagate and Western Digital have posted huge gains over the past 12 months. Will the party continue…

Chris Lange |

Why Western Digital Could Be Worth More Than Expected

Wells Fargo initiated coverage on Western Digital with an Outperform rating and a $100 to $110 valuation range.

Why Higher Guidance From Seagate Is Bad for the Shares
Jon C. Ogg |

Why Higher Guidance From Seagate Is Bad for the Shares

Seagate Technology has raised guidance and cited stronger demand than expected for the high-capacity enterprise hard disk drives.

Jon C. Ogg |

Disk Drives.. Value Stocks to Value Traps (WDC, STX, AAPL, SNDK)

Investors generally look to low price-to-earnings ratios to find “Value Stocks.”  The trick is to avoid companies which look like…

How the Seagate Earnings Win Props Up Western Digital
Chris Lange |

How the Seagate Earnings Win Props Up Western Digital

When Seagate Technology reported better-than-expected fiscal fourth-quarter financial results, it boosted shares of rival Western Digital as well.

Premarket Movers Headed Higher: Western Digital (WDC), Charter Communications (CHTR), Arista Networks (ANET) Global Payments (GPN)
Paul Ausick |

Premarket Movers Headed Higher: Western Digital (WDC), Charter Communications (CHTR), Arista Networks (ANET) Global Payments (GPN)

Tuesday's premarket session has seen some solid upward moves from based on earnings and an announced spinoff.

Top Gaining Stocks

CarMax
KMX • Vol: 7,330,419
Corning
GLW • Vol: 22,800,969
Intel
INTC • Vol: 233,719,006
Super Micro Computer
SMCI • Vol: 68,465,534
Enphase Energy
ENPH • Vol: 13,978,376

Top Losing Stocks

Accenture
ACN • Vol: 41,744,333
EPAM Systems
EPAM • Vol: 5,636,587
Cognizant
CTSH • Vol: 61,311,400
Coterra Energy
CTRA • Vol: 73,319,495
Kroger
KR • Vol: 26,704,230