3 Key Highlights From Western Digital's Analyst Day

Following Western Digital Corp (NASDAQ: WDC)'s Analyst Day, Deutsche Bank Securities highlighted three key takeaways:

1. Positive update to the second quarter 2017 guidance.
2. Unveiling of a better-than-expected long-term financial model.
3. Finalization of an eight-year renewal of an IP licensing and royalty agreement with Samsung.

   Upbeat Guidance

   Analyst Sherri Scribner noted that the company expects second-quarter revenues of $4.75 billion and non-GAAP earnings per share of $2.10–$2.15 and gross margins of 36 percent, which is an upward revision from the previous guidance of sequentially flat sales, non-GAAP earnings of $1.85–$1.95 and gross margins of 35 percent. The analyst is of the view the upside likely came from additional IP revenues from Samsung.

   Long term, the company expects revenue growth of 4–8 percent and gross margins of 33–38 percent, the analyst added. Operating margins are expected at 18–23 percent, with the company hoping to achieve the target in 12–24 months.
   The firm noted that the company expects to ship the 64-layer 3D NAND chips in volume by the first half of the calendar year 2017.

   Significant Earnings Power Seen

   Deutsche Bank commended the company for outlining its strong position as a diversified leader of storage solutions in a market that could experience growth. Given the finalization of the Samsung IP agreement and the higher long-term margin target, the firm sees significant earnings power for the company. Accordingly, the firm raised its price target for the shares.

   Deutsche Bank has a Buy rating on shares of Western Digital, while it raised its price target for the shares of the company to $75 price from $68.

   At time of writing, shares of Western Digital were surging up 6.03 percent to $67.70.

   Image Credit: By Solomon203 [CC BY-SA 3.0], via Wikimedia Commons

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