Results at a glance:
Source: Company, Phillip Securities Research (Singapore)
HDD Units Shipped:
WDC guidance for 2QFY17:
We maintain our “BUY” call on WDC and increased our target price to US$71.24. This represents a 23.4% upside to the current last traded price. WDC outperformed our expectations and consensus estimates. HDD demand showing signs of strength is a positive indication for WDC’s plans to continue offering both HDD and SSD products, especially after last quarter’s poor HDD showing. The increasing margins, due to better product mix, is also an encouraging sign for WDC. Since we released our initiation, WDC’s share price has gone up and is close to our previous target price of US$62.88. Given the better than expected integration and cost controls resulting in lower Operating Expenses, as well as the repricing of their debt to reduce annual interest expense significantly, we have increased our target price to reflect these developments. With cloud and enterprise storage continuing to increase demand for data storage capacity, we remain confident in WDC’s ability to grow their business. Overall, we feel that this quarter’s numbers have shown that WDC has been able to keep on track with the integration of its acquisitions and that the acquisition of SanDisk is already starting to show fruits, with growing gross margins and revenues. With HDD showing signs of stabilizing, we maintain our assumption that the HDD market is not likely to decline to zero and that WDC remains well positioned to profit from both the HDD and SSD markets.