American computer drive manufacturer and data storage company Western Digital Corp. (NASDAQ:WDC) reported mixed second-quarter Fiscal 2023 results. The company’s revenue exceeded expectations, but earnings came in shy of the Street estimates.
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Along with the Q2 results, WDC also announced that private equity companies Apollo Global Management (NYSE:APO) and Elliott Investment Management jointly bought $900 million of its convertible preferred stock at an initial conversion price of $47.75 per share. Following the news, WDC stock plunged 6% in the after-hours trading session on January 31.
The flash and hard disc drive (HDD) manufacturer is witnessing weak demand for its products owing to slow demand for PCs, smartphones, and the cloud coupled with the tough macroeconomic environment.
On the other hand, WDC is said to be in merger talks with Japan’s Kioxia Holdings Corp., which has propelled the stock up nearly 26% in the last three months vis-à-vis losing 14.5% over the past year.
Western Digital’s Q2 Results in Detail
The company’s revenue came in at $3.11 billion, beating analysts’ estimates by $140 million. However, the adjusted loss of $0.42 per share came in significantly higher than analysts’ expected loss of $0.15 per share.
In Q2FY23, all of WDC’s end-market segments reported massive declines in revenue compared to the prior-year period. Cloud revenue fell 36%, Client revenue dropped 41%, and Consumer revenue declined 25% compared to Q2FY22 figures.
Looking ahead, WDC expects third-quarter revenue to fall in the range of $2.60 billion to $2.80 billion, while adjusted loss is forecasted between $1.70 and $1.40 per share.
WDC’s Q2 loss included $100 million in charges related to the underutilization of hard disk drives, and the company expects Q3 to include similar charges to the tune of $250 million.
Is Western Digital Stock a Buy?
Analysts prefer waiting on the sidelines currently as the demand for WDC’s products remains weak. On TipRanks, WDC stock has a Hold consensus rating based on three Buys, six Holds, and one Sell rating. Also, the average Western Digital price target of $40.56 implies 7.7% downside potential from current levels.
