Western Digital (NASDAQ:WDC) posted its financial results for the third quarter of fiscal 2020 (quarter ended April 3) on Thursday after the market bell. The stock fell 10% in after-hours trading on Thursday. Although the revenues met analysts’ consensus estimate, the earnings missed the estimates. Investors were disappointed because the company issued a lower-than-expected earnings outlook for the fourth quarter.
Western Digital’s Q3 earnings
Western Digital generated revenue of $4.18 billion—an increase of 13.6% from the third quarter of fiscal 2019. The company met Wall Street analysts’ consensus revenue estimate of $4.18 billion. The company posted an adjusted net profit of $257 million during the quarter—a 424.4% rise YoY (year-over-year). In the third quarter, Western Digital reported an adjusted EPS of $0.85 compared to $0.17 in the third quarter of fiscal 2019. The earnings missed analysts’ consensus estimate of $0.93 per share.
The revenue from Western Digital’s Client Devices segment rose 12.7% YoY to $1.83 billion. The Data Center sales rose 22.3% YoY to $1.52 billion, while Client Solutions sales rose 2.1% YoY to $821 million.
According to a MarketWatch report, “The company said that its desktop hard drive and smart video hard drive demand was weaker because of the COVID-19 pandemic. Falling retail sales due to the pandemic also hurt the company’s sales towards the end of the quarter.”
Western Digital’s Q4 guidance
Western Digital has given a revenue guidance of $4.25 billion–$4.45 billion for the fourth quarter. The technology company also expects its fourth-quarter non-GAAP EPS to be $1.00–$1.40. Wall Street expected an adjusted EPS of $1.22 on sales of $4.31 billion. According to a ZDNet report, “Western Digital will face headwinds due to closed retailers and reopenings that will revolve around curbside pickup and less volume.”
Among the 32 analysts following Western Digital stock, 19 recommend a “buy”—down from 21 in the last month. About 13 analysts recommend a “hold”—up from 12 in the previous month. None of the analysts recommended a “sell” in the last month. Analysts’ mean target price on the stock is $64.94, which implies a 40.9% gain from the current level of $46.08. The consensus target price for the stock has fallen from $70.99 in April—a fall of 8.5%.
After the third-quarter earnings results, Cowen and Company decreased its target price on Western Digital stock from $75 to $70. RBC reduced its target price on the stock from $85 to $70.
Western Digital stock fell 3.5% on Thursday and closed at $46.08 with a market capitalization of $13.8 billion. The stock was trading 36.0% below its 52-week high of $72.00. Meanwhile, the stock was trading 68.2% above its 52-week low of $24.40.
Based on the closing price on Thursday, Western Digital stock was trading 8.8% above its 20-day moving average of $42.34. The stock is also trading 1.3% above its 50-day moving average of $45.48 and 16.1% below its 100-day moving average of $54.90. Western Digital’s 14-day relative strength index number is 55. The number suggests that the stock isn’t oversold or overbought.
On Thursday, the Dow Jones Industrial Average and the S&P 500 fell by 1.2% and 0.9%, respectively. Read US Stock Market Crash Reversal: Is a Double Bottom Next? to learn more.