Western Digital jumps as demand for drives, flash power earnings beat
The shares of Western Digital (WDC), which develops hard disk drives and flash memory products, are climbing after the company reported stronger than expected results last night. In the wake of the results, Bank of America upgraded its rating on the shares to Neutral from Underperform, while RBC Capital and Cowen raised their price targets on the stock. RESULTS: Western Digital reported first quarter earnings per share, excluding some items, of $1.18, versus the consensus estimate of $1.05. The company's revenue came in at $4.7B, versus the consensus outlook of $4.52B. Demand for Western Digital's hard disk drive and flash memory products were strong, driven by the proliferation of cloud and mobile applications, as well as a rebound in PC sales, the company's CEO, Steve Milligan, said in a statement. ANALYST REACTION: Western Digital is benefiting from improved industry fundamentals and its earnings were strong, wrote Bank of America Merrill Lynch analyst Wamsi Mohan. Additionally, the company is effectively integrating flash memory maker SanDisk, which it acquired last year, and it has lowered its interest costs, Mohan noted. He raised his price target on the shares to $66 from $38. Western Digital's results were "impressive," wrote RBC Capital's Amit Daryanani, who raised his price target on the name to $72 from $65. The company's "fundamentals remain intact," as it "should benefit from a favorable HDD market" and "a tight market" for NAND, a form of flash memory, the analyst stated. He kept an Outperform rating on the shares. The NAND market will probably "remain favorable" in the near-term, wrote Cowen analyst Karl Ackerman, who raised his price target on the stock to $70 from $58. Moreover, Western Digital's analyst day, slated to be held on December 6, should provide a positive catalyst for the shares, wrote Ackerman. At the analyst day, Western Digital will probably update its financial model, disclosing additional synergy targets for the SanDisk deal, as well as margin and cash flow expectations, the analyst believes. Furthermore, Western Digital should benefit from additional synergies from its acquisition of Hitachi and "healthy" spending by data centers, the analyst believes. He kept an Outperform rating on the stock. ANOTHER TO WATCH: Seagate (STX) also develops and markets hard disk drives. PRICE ACTION: In morning trading, Western Digital jumped 8% to $61.14 and Seagate advanced 1.2% to $35.24 per share.