- Western Digital has a extra aggressive progress technique for its solid-state drives (SSD) and Cloud enterprise. Nonetheless, like Google, it additionally skilled quarter-over-quarter (QoQ) deceleration in Cloud revenues.
- Western Digital CEO David Goeckeler said he expects their Cloud finish market to “develop going ahead” to catch as much as its Shopper and Shopper income progress at 11% and 14%, respectively.
- Seagate continues to flex its dominance in enterprise HDD, growing HAMR expertise that may enhance HDD storage capability by 10X, making them superior to SSDs in price and storage capability.
Information is generated each second across the clock. Oceans and oceans of information are throughout us. That information needs to be saved someplace to be analyzed and used for no matter functions. The viral adoption of synthetic intelligence (AI) functions has accelerated the demand for storage. That is the place these two shares come into play.
They’re two of the biggest producers of client information storage gadgets, controlling an 80% market share of the legacy exhausting disk drives (HDD) market. The shift has been to adapt solid-state drives (SSD) to make the most of non-moving elements and flash reminiscence.
h2 SSD superiority over HDD/h2
SSDs are sooner, extra vitality environment friendly and extra dependable than HDDs, however at the next value level. Nevertheless, costs for SSDs are dropping, which is placing extra stress on HDD gross sales. One is pursuing an aggressive push into SSD expertise, and the opposite has a conservative method, trying to dominate a legacy expertise however profitable extra market share. Each firms try to recuperate from normalization and dropping cash. This is an evaluation of the higher funding in the long term.
h2 Western Digital Co./h2
This legacy HDD maker noticed the longer term in flash reminiscence, prompting it to accumulate main flash storage maker SanDisk in October 2015 for $19 billion. Western Digital Company (NASDAQ:WDC) has a extra numerous technique of aggressively pursuing progress in flash storage with new merchandise within the SSD and cloud storage options phase. Western Digital has an arguably extra aggressive progress technique, with SSD forming partnerships and joint ventures.
h2 Flash Ventures/h2
Flash Ventures is a JV owned 49.9% by Western Digital and 50.1% by Kioxia. Kioxia is a Japanese multinational laptop reminiscence producer primarily based in Tokyo, Japan. It was spun off from Toshiba (OTC:TOSYY) in June 2018 as Toshiba Reminiscence Company. Flash Ventures owns and leases gear for flash wafer manufacturing. Kioxia was in merger talks with Western Digital, however they had been dropped after its largest shareholders, SK Hynix and Bain Capital, shot down the concept. Merger makes an attempt had been mentioned as early as 2021 however obtained stalled.
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It purchases wafers from Kioxia at a value underneath foundry agreements. It sells them to Western Digital and Kioxia at price with a small markup whereas charging bills to each firms. Each Western Digital and Kioxia present R&D and manufacturing whereas paying Flash Ventures bills whereas buying the wafers and supply funding for Flash Ventures gear purchases. Flash Ventures repays the loans for gear purchases from working money move.
h2 Weak cloud however strengthening shopper and client revenues/h2
On Oct. 30, 2023, Western Digital reported its fiscal Q1 2024 earnings for the quarter ending September 2023. The corporate reported a non-GAAP EPS lack of $1.76, beating consensus analyst estimates for a lack of $1.91 by 15 cents. This included $225 million of underutilization-related expenses in Flash and HDD of $225 million. This cost is often a results of mushy demand, financial downturn and elevated competitors. HDD income declined resulting from decrease exabyte shipments and weaker China restoration.
Revenues fell 26.4% YoY to $ 2.75 billion, beating analyst estimates of $2.66 billion. Cloud income decreased 12% QoQ, which parallels the softness Alphabet (NASDAQ:GOOGL) Inc (NASDAQ:GOOG) reported for its Google Cloud QoQ income deceleration from 28% to 21%. Shopper income rose 11% QoQ. Shopper income rose 14% QoQ. Nevertheless, the corporate sees it as a turning level for Cloud. Flash revenues elevated sequentially, led by report exabyte shipments and continued content material progress within the Shopper and Shopper finish markets, together with retail merchandise and business-critical (BC) merchandise.
h2 Has Cloud decline bottomed? CEO thinks so./h2
Western Digital CEO David Goeckeler addressed Cloud when he commented:
“Our Shopper and Shopper-end markets proceed to carry out properly, and we now anticipate our Cloud finish market to develop going ahead. Our improved price construction positions Western Digital to capitalize on enhanced earnings energy as market circumstances proceed to enhance.”
h2 Separating flash and HDD companies/h2
Western Digital will cut up its HDD and Flash enterprise into separate and unbiased public firms. The separation permits every firm to pursue higher modern expertise and product improvement, working extra effectively with distinct capital constructions. It is anticipated to be a tax-free transaction focused for the second half of the calendar yr 2024. That is one other win for activist funding agency Elliott Administration, who first proposed a separation in Might 2022 upon taking a stake in Western Digital.
CEO Goeckeler additionally commented:
“Our HDD and Flash companies are each properly positioned to capitalize on the info storage trade’s important market dynamics, and as separate firms, every could have the strategic focus and sources to pursue alternatives of their respective markets. Importantly, separating these franchises will unlock important worth for Western Digital shareholders, permitting them to take part within the upside of two trade leaders with distinct progress and funding profiles.”
This announcement is what doubtless induced the share to hole up.
h2 Optimistic expectations for fiscal Q2 2024/h2
Western Digital anticipated fiscal Q2 2024 EPS losses within the $1.35 to $1.05 versus $1.39 consensus analyst estimates. Revenues are anticipated between $2.85 billion to $3.05 billion versus $2.93 billion analyst estimates. HDD’s seasonal demand is predicted to enhance within the client finish market to drive sequential progress. Decrease value-based pricing efforts and underutilization expenses will result in sequential income and gross margin enhancements within the quarter and all through fiscal 2024.
h2 Analyst Actions/h2
On Oct. 30, 2023, Summit Insights upgraded shares of Western Digital to a Purchase from Maintain. On Oct. 31, 2023, Fox Advisors upgraded shares of Western Digital to Obese from Equal Weight with a $52 value goal. On Nov. 1, 2023, Western Digital upsized its convertible senior notes due in 2028, providing $1.4 billion, up from $1.3 billion introduced on yesterday.
Western Digital analyst scores and value targets are at MarketBeat. Western Digital friends and competitor shares could be discovered with the MarketBeat inventory screener.
h2 Weekly Symmetrical Triangle/h2
The weekly candlestick chart on WDC illustrates a symmetrical triangle sample. The descending trendline commenced in August 2022 after peaking at $50.95 as shares fell to a low of $29.79 by December 2022. The ascending trendline fashioned from the low of $29.79, rising in direction of the apex level.
The weekly market construction low (MSL) was triggered on the $43.76 breakout. WDC fell out of the triangle heading into earnings however rapidly jumped again into the triangle after information of the introduced cut up into two firms for HDD and Flash within the second half of 2024. The weekly relative power index (RSI) has bounced again by the 50-band. Pullback assist ranges are at
h2 Seagate Know-how Holdings PLC/h2
Primarily based out of the Netherlands, Seagate Know-how PLC (NASDAQ:STX) manufactures each HDD and SDD. The corporate has pivoted extra to the SSDs however stays dedicated to rising its market share within the HDD phase. Seagate used to generate 70% of its revenues from HDD gross sales, however that has steadily elevated to 62% in its newest quarter and 38% from SSDs. The expansion technique is much less aggressive than Western Digital in that it seeks to keep up its dominance within the enterprise HDD phase.
h2 HDDs vs. SSDs /h2
Whereas HDDs should not as quick and environment friendly as SSDs, they nonetheless have some benefits. HDDs are cheaper and have larger storage capability than SSDs and nonetheless preserve an edge in reliability. Nevertheless, since SSDs use flash reminiscence chips, there aren’t any transferring elements like HDDs. This implies decrease latency and sooner efficiency however at the next value with much less storage capability, for now. This offers a wider benefit to HDDs for storage and prices versus SSDs. HAMR expertise remains to be being developed.
h2 It is HAMR time/h2
HDDs use magnetic platters to learn and write information. These have a a lot larger storage capability than present flash reminiscence chips. The cheaper value and added storage capability is the principle benefit of HDDs versus SSDs. A brand new expertise referred to as Warmth Assisted Magnetic Recording (HAMR) is the following era of enterprise HDDs. HAMR makes use of laser expertise to warmth a tiny spot on the disk platter earlier than information is written. The heating course of permits simpler flipping of the magnetic polarity of the grains on the platter, which permits extra storage in a smaller space. HAMR can enhance storage by 10X in the identical quantity of house.
h2 Bettering demand traits/h2
On Oct. 26, 2023, Seagate reported its fiscal Q1 2023 EPS lack of 22 cents versus consensus analyst estimates for a lack of 24 cents, a 2-cent beat. Revenues fell 28.6% YoY to $1.4 billion, falling in need of $1.51 billion analyst estimates.
h2 Dividend declaration/h2
Seagate declared a 70 cent per share money dividend, bringing the annual yearly dividend yield to three.87%. Western Digital doesn’t have a dividend.
h2 In-line steerage/h2
Seagate sees fiscal Q2 2024 EPS starting from a lack of 30 cents to a revenue of 10 cents versus a lack of 1 cent, consensus analyst estimates. Revenues are anticipated between $1.4 billion to $1.7 billion versus $1.61 billion analyst estimates.
Seagate CEO David Mosely commented:
“Throughout a longer-than-typical downcycle, we now have prioritized monetary self-discipline, constructive free money move era and execution on our HAMR product roadmap, which is able to prolong our trade management in areal density and enhance the whole price of possession for our prospects,” He continued, “With indications that demand fundamentals in sure markets are beginning to enhance, together with a modest uptick in U.S. cloud, Seagate is properly positioned to reinforce profitability and seize engaging long-term alternatives for Mass Capability storage.”
h2 Analyst Actions/h2
Seagate outcomes spurred a number of analyst actions. On Oct. 26, 2023, Summit Insights raised its ranking to Maintain from Promote. On Oct. 27, 2023, Morgan Stanley reiterated its Equal-Weight ranking, elevating its value goal to $67 from $60. UBS reiterated its Impartial ranking however raised its goal value to $70, up from $60 per share. Rosenblatt reiterated its Purchase ranking and raised its value goal to $78 from $68. Mizuho reiterated their Purchase ranking and raised the worth goal to $70, up from $66 per share.
Seagate Know-how analyst scores and value targets are at MarketBeat.
h2 Weekly Ascending Triangle Sample/h2
The weekly candlestick chart on STX illustrates an ascending triangle sample. The flat-top trendline resistance is at $73.72. The ascending trendline commenced in October 2022 after forming a backside at $45.30. The weekly 200-period transferring common has been rising at $64.84. The weekly MSL set off is at $63.40. The weekly RSI is rising by the 60-band. Pullback assist ranges are $67.95, $63.40 weekly MSL set off, $58.49 and $53.30.
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