Xcyte Digital Corp. Shareholders Approve Omnibus Equity Incentive Plan

The most recent trading session ended with Western Digital (WDC) standing at $64.09, reflecting a -1.43% shift from the previouse trading day's closing. The stock's change was less than the S&P 500's daily gain of 0.13%. At the same time, the Dow added 0.55%, and the tech-heavy Nasdaq lost 0.52%.

The maker of hard drives for businesses and personal computers's stock has climbed by 1.51% in the past month, falling short of the Computer and Technology sector's gain of 1.56% and the S&P 500's gain of 3.67%.

Investors will be eagerly watching for the performance of Western Digital in its upcoming earnings disclosure. The company's earnings per share (EPS) are projected to be $1.72, reflecting a 197.73% increase from the same quarter last year. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $4.11 billion, up 49.5% from the year-ago period.

For the full year, the Zacks Consensus Estimates are projecting earnings of $8.35 per share and revenue of $17.13 billion, which would represent changes of +4275% and +31.77%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for Western Digital. These recent revisions tend to reflect the evolving nature of short-term business trends. Therefore, positive revisions in estimates convey analysts' confidence in the company's business performance and profit potential.

Our research suggests that these changes in estimates have a direct relationship with upcoming stock price performance. To exploit this, we've formed the Zacks Rank, a quantitative model that includes these estimate changes and presents a viable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has shifted 17.02% downward. Western Digital presently features a Zacks Rank of #3 (Hold).

Looking at its valuation, Western Digital is holding a Forward P/E ratio of 7.78. This valuation marks a discount compared to its industry's average Forward P/E of 13.65.

The Computer- Storage Devices industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 160, putting it in the bottom 37% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

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Seagate Technology Holdings plc’s STX stock closed the last trading session at $102.13, 10% below its 52-week high of $113.57, reached on July 24, 2024.

Over the past six months, the stock has appreciated 19.6%, outperforming the S&P 500 composite and the sub-industry’s growth of 9.3% and 8.9%, respectively. It has also outperformed its peers. Over the same time frame, NetApp NTAP and Western Digital WDC have posted gains of 15.3% and 9.6%, respectively, while Pure Storage PSTG shares have lost 3.3%.

Solid financial performance is buoying the stock’s trajectory. The company is experiencing increasing demand for its mass capacity solutions. STX’s earnings beat estimates in three of the last four quarters, delivering an average surprise of 80.9%.

Reflecting the positive sentiment around STX, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 60 days, analysts have increased their estimates for the current and next quarters by 38.8% and 33.3% to $1.43 and $1.80 per share, respectively.

Momentum in Mass Capacity Demand Makes us Bullish on STX

Momentum in mass capacity solutions attributed to stronger nearline cloud demand remains a tailwind for Seagate. Strengthening the global cloud demand environment is fueling demand for nearline capacity demand. In the last reported quarter, nearline cloud revenues more than doubled year over year, owing to higher traditional cloud computing workloads and new AI deployments. STX expects this momentum to continue in fiscal 2025.

Overall mass capacity revenues surged 46% year over year to $1.437 billion in the last reported quarter. Sequentially, mass capacity revenues were up 22%.

Mass capacity exabyte shipments represent more than 90% of total exabyte shipments. The company shipped 103.9 exabytes for the mass-capacity storage market (including nearline, video and image applications and network-attached storage). This recorded a year-over-year increase of 38% in exabyte shipments and 17% sequentially.

The improving metrics signify that things are probably looking brighter for STX after a period of lackluster performance. Driven by incremental improvements in mass capacity demand, management anticipates first-quarter fiscal 2025 revenues to be $2.10 billion (+/- $150 million).

STX’s Mozaic Platform: Another Catalyst

Seagate’s launch of the Mozaic 3+ hard drive platform, featuring Heat-Assisted Magnetic Recording (HAMR) technology, is also expected to aid in capturing a greater share of the mass capacity storage solutions market.

Seagate expects HAMR to aid in exploiting megatrends like AI and machine learning, which will drive long-term demand for cost-effective mass-capacity storage solutions. The company has completed multiple qualifications for its 24TB CMR / 28TB SMR drives. It expects to begin volume shipments in the first quarter of fiscal 2025.

It shipped a small volume of Mozaic 3+ for revenues to non-cloud customers in the fiscal fourth quarter. It anticipates completing the qualification with the lead CSP customer and starting multiple qualifications with the cloud customers of the United States and China in the current quarter. It anticipates a larger volume ramp from mid-calendar 2025.

STX’s Improving Margin Performance & Solid Outlook

Higher exabyte demand trends, ongoing price adjustments and continued cost containment efforts are driving the margin performance.

In the last reported quarter, non-GAAP gross margin increased to 30.9% from 19.5% in the prior-year quarter. Non-GAAP income from operations totaled $327 million, up from $55 million a year ago. Non-GAAP operating margin increased to 17.3% from 3.4% in the year-earlier quarter.

Going ahead, STX expects gross margin is expected to benefit from a higher mix of mass capacity revenues and ongoing pricing actions. At the midpoint of the revenue guidance, management expects the non-GAAP operating margin to grow in the high-teens percentage range of revenues. The non-GAAP operating expenses are expected to be $270 million.

STX’s Strong Technical Indicators & Attractive Valuation

Technical indicators are also supportive of STX’s strong performance. The stock is trading above its 100-day and 200-day moving averages, indicating upward momentum and price stability. This technical strength reflects positive market perception and confidence in its growth prospects.

Western Digital (WDC) has recently been on Zacks.com's list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock's performance in the near future.

Over the past month, shares of this maker of hard drives for businesses and personal computers have returned +2.9%, compared to the Zacks S&P 500 composite's +4% change. During this period, the Zacks Computer- Storage Devices industry, which Western Digital falls in, has lost 6.9%. The key question now is: What could be the stock's future direction?

Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.

Revisions to Earnings Estimates

Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, Western Digital is expected to post earnings of $1.72 per share, indicating a change of +197.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.4% over the last 30 days.

The consensus earnings estimate of $8.35 for the current fiscal year indicates a year-over-year change of +4,275%. This estimate has changed -17% over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $9.65 indicates a change of +15.5% from what Western Digital is expected to report a year ago. Over the past month, the estimate has changed -3.1%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Western Digital is rated Zacks Rank #3 (Hold).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue Growth

While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.

For Western Digital, the consensus sales estimate for the current quarter of $4.11 billion indicates a year-over-year change of +49.5%. For the current and next fiscal years, $17.13 billion and $19.27 billion estimates indicate +31.8% and +12.5% changes, respectively.

Last Reported Results and Surprise History

Western Digital reported revenues of $3.76 billion in the last reported quarter, representing a year-over-year change of +40.9%. EPS of $1.44 for the same period compares with -$1.98 a year ago.

Compared to the Zacks Consensus Estimate of $3.77 billion, the reported revenues represent a surprise of -0.18%. The EPS surprise was +14.29%.

The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates three times over this period.

Valuation

No investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Western Digital is graded C on this front, indicating that it is trading at par with its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Conclusion

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Western Digital. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.

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