Market Overview

Western Digital Downgraded, BMO Says Shares Are Range-Bound

Western Digital Downgraded, BMO Says Shares Are Range-Bound
Related WDC
36 Stocks Moving In Wednesday's Mid-Day Session
Benzinga's Top Upgrades, Downgrades For November 20, 2018
Why Won't Western Digital Shares Stage A Comeback? (Seeking Alpha)

Western Digital Corp (NASDAQ: WDC) shares could be range-bound in the near-term, according to BMO Capital Markets, prompting a downgrade from the research firm. 

The Analyst

BMO Capital Markets analyst Tim Long downgraded shares of Western Digital from Outperform to Market Perform and lowered his price target from $120 to $85.

The Thesis

Western Digital's fundamentals are healthy, but several factors keep the stock in the trading range, analyst Long said in a Wednesday note. (See the analyst's track record here.) 

A flash supply-demand balance is on the horizon, meaning there's limited upside for gross margins and revenue growth, the analyst said. 

Notwithstanding healthy bit shipments anticipated throughout calendar 2018 due to strong demand and improved capacity, Long said he expects a decline in ASPs that will negatively impact revenue growth and gross margins in fiscal 2019.

The peak cycle is expected to keep shares of the company range-bound, as it trades like a hybrid of hardware and memory, Long said. 

"Given the cyclical nature of the memory industry, we believe valuation will remain depressed on the expected slower growth and lower gross margins."

Hard disk drives, or HDDs, are expected to remain in decline, with a 7-percent decline in units projected by BMO for calendar 2019. HDDs account for about half of Western Digital's revenue. 

The Price Action

Western Digital shares have gained more than 17 percent over the past year.

The stock was trading down 0.68 percent at $82.11 at the time of publication Thursday. 

Related Links:

Western Digital And Toshiba: The Settlement And The Guidance, Explained

A Word In Defense Of Western Digital

Photo by Kskhh/Wikimedia. 

Latest Ratings for WDC

Dec 2018Craig-HallumUpgradesHoldBuy
Nov 2018SusquehannaDowngradesPositiveNeutral
Oct 2018CitigroupMaintainsBuyBuy

View More Analyst Ratings for WDC
View the Latest Analyst Ratings

Posted-In: BMO Capital Markets Tim LongAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (WDC)

View Comments and Join the Discussion!

Latest Ratings

SYBXChardan CapitalInitiates Coverage On20.0
GEJP MorganUpgrades6.0
FEYEMorgan StanleyDowngrades21.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

NYU's Scott Galloway: Amazon Doesn't Need To Acquire Target

Zumiez Zooms On Guidance Bump, Sales Growth