Results at a glance:
Source: Company, Phillip Securities Research (Singapore)
HDD Units Shipped:
WDC guidance for 2QFY17:
We downgrade our call on WDC to an “ACCUMULATE” with an increased target price of US$84.11. Since our last earnings update on WDC, the stock has surged over 30% to its last closing price of US$79.73 (our previous target price was US$71.54). WDC outperformed our expectations and consensus estimates. This quarter’s results show that WDC acquisition of SanDisk was a necessary move to accelerate growth. The product mix of HDD and SSD allowed for a better gross margin and the synergies for the consolidated company continue to be accretive to their bottom line. HDD demand while down yoy, desktop and notebook units shipped were up qoq, which is a positive indication for the stabilization of the PC market. Given the margin expansion and continued growth in demand for data storage, we believe that WDC is well positioned to continue to benefit from the growth of cloud and data center storage requirements. The refinancing of their debt in the previous quarter, continued achievement of acquisition synergies and better than expected cost controls lead us to increase our target price to US$84.11.