WDC - Embedded Expectations Analysis - 2021 09 16
Western Digital Corporation (WDC:USA) currently trades near historical averages relative to UAFRS-based (Uniform) earnings, with an 8.3x Uniform P/E. At these levels, the market is pricing in expectations for the profitability to remain stable, and management may be concerned about supply constraints, their hard drives business, and new product launches.Specifically, management may have concerns about industry-wide supply constraints, the pace of cloud adoption, and the effectiveness of long-term customer purchase agreements in their hard drive segment. In addition, they may lack confidence in their ability to continue beating their revenue guidance, sustain the benefits of Chia, and meet exabyte growth targets. Furthermore, they may be exaggerating the potential of their energy-assisted hard drives, and they may be concerned about lingering pandemic-related headwinds.
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
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