Western Digital’s returns
Shares of semiconductor company Western Digital (WDC) have fallen close to 57.0% in the last 12 months. Since the start of May 2019, WDC stock has fallen more than 27.0%, and it’s currently trading 57.0% below its 52-week high of $37.08.
The trade war’s escalation has weighed in heavily on semiconductor stocks due to their exposure to China (FXI). The VanEck Vectors Semiconductor ETF (SMH) and the iShares PHLX Semiconductor ETF (SOXX) fell 15.5% and 16.5%, respectively, in May. WDC generates ~21.0% of its sales from China.
WDC has tumbled, as its sales are expected to fall considerably. Analysts expect WDC’s sales in the fourth quarter of fiscal 2019 (which ends in June) to fall 27.7% to $3.7 billion. Its sales are expected to fall 19.4% in fiscal 2019 and 2.6% in fiscal 2020. WDC is expected to return to revenue growth in fiscal 2021.
WDC has also missed earnings estimates in the last two quarters, which has sent the stock spiraling downward. In the third quarter, WDC reported a $110 million write-down of flash storage devices. WDC is currently operating in a market with excess supply and lukewarm demand. The PC and smartphone markets have matured, and trade war fears continue to escalate.
WDC stock is trading at a forward PE multiple of 9.4x. Analysts expect its earnings to fall 67.0% in fiscal 2019 and 19.5% in fiscal 2020. The company’s earnings are expected to fall at a compound annual growth rate of 13.8% over the next five years.
There are far too many headwinds for WDC stock. Its negative earnings growth might also not sit too well with investors.
Of the 29 analysts tracking WDC, 22 have given it “buys,” seven have given it “holds,” and none have given it “sells.” Analysts have a 12-month average target price of $57.09 on the stock, indicating a potential upside of 54.0% from its current price.