Leading storage system manufacturer Western Digital (NASDAQ: NASDAQ:) beat analysts’ expectations in the first quarter of 2024, with revenue up 23.3% year over year to $3.46 billion. The company expects next-quarter revenue to be about $3.7 billion, in line with analyst estimates . Non-GAAP earnings were $0.63 per share, improving from a loss of $1.34 per share in the same quarter last year.
Is now the time to buy Western Digital? Find out by reading the original article on StockStory, it’s free..
Key characteristics of Western Digital (WDC) in the first quarter of 2024:
- Income: $3.46 billion versus analysts’ estimates of $3.35 billion (3.2% increase)
- earnings per share (non-GAAP): $0.63 vs. analysts’ estimates of $0.15 (312% increase)
- Q2 2024 Earnings Guidance is $3.7 billion at the midpoint, which is roughly in line with analysts’ expectations.
- Gross Profit (GAAP): 29% compared to 10.2% in the same quarter last year.
- Unfulfilled inventory days: 119 compared to 114 in the previous quarter
- Free Cash Flow $91 million compared to -$242 million in the prior quarter.
- Market capitalization: $22.71 billion
Western Digital (NASDAQ: WDC), founded in 1970 by a Motorola (NYSE:) employee, is a leading manufacturer of hard drives, solid-state drives and flash memory.
Semiconductor memory. Rapid growth in data generation and the need to support increased computing power for everything from consumer devices to data center servers is driving demand for memory chips. From content delivery networks and edge computing to the cloud, data storage is a key component underlying the global technology architecture. On top of this, long-term growth factors such as machine learning and the boom in multimedia digital content are further increasing the need for storage. Like all semiconductor segments, memory manufacturers are highly cyclical, driven by supply and demand imbalances and exposure to consumer product cycles.
remove advertising
.
Sales Growth Western Digital’s revenue has been declining over the past three years, declining at an average annual rate of 6.7%. As you can see below, it was a weaker quarter for the company, with revenue rising from $2.80 billion in the same quarter last year to $3.46 billion. The semiconductor industry is a cyclical industry, and long-term investors should be prepared for periods of high growth. followed by periods of declining income (which can sometimes offer favorable buying times).
Western Digital had a strong quarter, with revenue up 23.3% year over year, beating analysts’ estimates by 3.2%. Western Digital’s growth rate flipped from negative to positive this quarter, indicating that the recent cycle’s downturn is likely to recede.
Western Digital returned to positive revenue growth this quarter, and management expects that trend to continue. The company is forecasting 38.5% year-over-year growth in the next quarter, and analysts seem to agree, forecasting 38.9% growth over the next 12 months.
Product Demand and InventoryDays Inventory Outstanding (DIO) is an important metric for chip manufacturers as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a supply-constrained environment, inventories tend to be stable, allowing chipmakers to exert influence over pricing. A persistent increase in DIO could be a warning sign that demand is weak, and if inventories continue to rise, the company may have to cut production.
This quarter, Western Digital’s DIO Index was 119, 11 days above its five-year average, suggesting the company’s inventories have risen to higher levels than we’ve seen in the past.
remove advertising
.
Key Takeaways from Western Digital’s First Quarter Results We were impressed by Western Digital’s significant increase in gross profit in the quarter. We were also encouraged by its earnings, with earnings per share beating Wall Street estimates, driven by better-than-expected performance in its cloud and consumer markets. On the other hand, inventory levels have increased, but this may be a result of inventory accumulating ahead of demand – management noted that supply and demand dynamics in the industry are improving. Zooming out, we think it was a fantastic quarter that should draw applause from shareholders. However, the market was likely expecting more, with shares down 1.1% following the release to trade at $68.7 per share.