WDC is trading at a discount to analysts’ estimates
Western Digital (WDC) is currently trading at $52.01. Of the 29 analysts tracking WDC, 22 have given it “buys,” and seven have given it “holds.” Analysts’ 12-month average price target for WDC is $56.68, and the median estimate is $57.
WDC is trading at a discount of 9.6% to analysts’ median estimate. Peers Seagate (STX), Micron Technology (MU), and Applied Materials (AMAT) are trading at discounts of 12%, 6%, and 14%, respectively, to analysts’ average price targets.
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Though analysts expect WDC to rise 10% over the next 12 months, they’ve been wrong before. Back in October 2018, analysts expected WDC’s revenue to fall only 1.9% year-over-year in fiscal 2019. They also had a 12-month price target of $98 for WDC, which was 108% higher than its stock price.
Analysts were way off the mark on both accounts. WDC’s sales as we know them could fall more than 19% in fiscal 2019. Its share price estimates have also been revised to more conservative levels.
Is WDC attractive at its current levels?
Because WDC is already up 36% this year, whether it will continue to rise for the rest of 2019 is the question investors must ask themselves. We’ve seen that its sales are expected to fall this fiscal year as well as the next. The company has a forward PE ratio of 9.83x, which may not seem high, but its stock looks overvalued considering its negative revenue and earnings growth.
WDC will have to consistently beat analysts’ estimates over the next few quarters for its stock price to keep rising. The feat could prove a challenging one in a difficult macroeconomic environment coupled with declining chip prices.
WDC’s earnings in the third quarter of fiscal 2019 could provide us with more insights, and a lot will depend on whether the company provides investors with robust guidance.