By Mackenzie Tatananni
Western Digital stock fell on the heels of a downgrade from Benchmark, with analysts citing "a growing number of concerns" for the data infrastructure company in fiscal 2025.
Shares of Western Digital declined 4.7% to $61.10, putting the stock on track for its lowest close since Sept. 6, according to Dow Jones Market Data.
Analyst Mark Miller downgraded the stock to Hold from Buy and reduced his full-year fiscal forecast from adjusted earnings of $8.16 a share on sales of $17.4 billion to $7.57 a share on sales of $16.7 billion.
Miller noted the threat of softening prices for NAND flash memory, a trend "driven by customer inventory adjustments in consumer markets."
Western Digital reported an earnings beat in the first fiscal quarter, largely resulting from strong demand from cloud-computing customers. Cloud revenue surged to $2.2 billion in the quarter, up 153% from the previous year and comprising more than half of total sales. However, weakness in the consumer segment lingered, as revenue of $678 million fell 7% from a year prior.
The disk-maker is preparing to split its NAND and hard disk drive businesses into two independent, public companies by early 2025. The spinoff, first announced in 2023, came to fruition after plans to merge the flash-memory business with Japan's Kioxia Holdings fell apart.
"Separating these franchises will unlock significant value for Western Digital shareholders, allowing them to participate in the upside of two industry leaders with distinct growth and investment profiles," CEO David Goeckeler said at the time.
In Thursday's note, Miller also nodded to "expected slowness in chip demand in the industrial and automotive markets," a pressing threat for Western Digital and competitors like Micron Technology.
Shares of Micron, one of the world's largest semiconductor manufacturers, tumbled after the company issued a disappointing outlook for its current quarter on Wednesday. Miller presented the company's "weak guidance" as a bad omen for Western Digital.
As shares of the data storage company fell sharply, Micron stock on Thursday plummeted 17% to $85.80.
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
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(END) Dow Jones Newswires
December 19, 2024 11:48 ET (16:48 GMT)
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