WDC - Embedded Expectations Analysis - 2020 03 13
Western Digital Corporation (WDC:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with a 14.1x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about their competitive positioning, production, and supply constraintsSpecifically, management may be concerned about declines in exabyte shipments, and they may be exaggerating the strength of their competitive positioning within data centers and the quality of their products for hyper scale and OEM customers. Moreover, they may lack confidence in their ability to ramp-up K1 and YMTC production, and they may be downplaying concerns about seasonality and NVMe supply constraints. Finally, management may lack confidence in their ability to meet margin guidance
Western Digital is a developer, manufacturer, and provider of data storage devices and solutions. The company's portfolio of technology and products address the following markets: Client Devices, which consist of hard disk drives (HDDs) and solid state drives (SSDs) for computing devices, flash-based embedded storage products, and flash-based memory wafers and components; Data Center Devices and Solutions, which consist of enterprise HDDs and enterprise SSDs, data center software and system solutions; and Client Solutions, which consist of HDDs and SSDs embedded into external storage products and removable flash-based products, such as cards, universal serial bus flash drives and wireless drives.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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