Stick with Western Digital Corporation (WDC) for the Long Term

The Western Digital Corporation (NASDAQ:WDC) bulls won the day, but the reality is that the 1.33 points or 2.9 percent advance gave very little definitive technical indication of where the stock could be headed next. On 12 February, the shares traded at $47.26 with a light trade volume of 4.628 million shares. After opening the session at $46.46, the shares went as high as $47.825 and as low as $46.3457, the range within which the stock’s price traded throughout the day. The firm is left with a market cap of $13.7 billion and now has 290 million shares outstanding. Western Digital Corporation (WDC) stock has gained 18.06 percent of market value in 21 trading days.

WDC stock has a trailing 3-year beta of 1.47, offering the possibility of a higher rate of return, but also posing more risk. The portion of a company’s profit allocated to each outstanding share of common stock was $2.26 a share in the trailing twelve months. The stock’s value has surged 27.83 percent year to date (YTD) against a decline of -41.36 percent in 12 month’s time. The company’s shares still trade -55.82 percent away from its 1-year high of $106.96 and 39.7 percent up from 52-week low of $33.83. The average consensus rating on the company is 2.4, on a scale where 5 equates to a unanimous sell rating. In short, the mean analyst recommendations are calling this stock a sell.

Western Digital Corporation (WDC) will probably climb 26.26 percent over the next 12 months, according to price target estimates compiled by finviz. Meanwhile, they have set a $126 price as 12-month high target. This represents a whopping 166.61 percent increase from where shares are trading today. The 12-month median price target assigned by the analysts stands at $47.5, which represents a return potential of 0.51 percent when compared to the closing price of the stock of $47.26 on Tuesday, February 12. The lowest price target for the stock is $30 — slightly more than -36.52 percent from WDC’s current share price.

History has shown that shares in Western Digital Corporation have gone down on 18 different earnings reaction days and are predicted to add 0.06 percent when the company reports upcoming earnings. Investors will get their next glimpse of WDC’s Q3 earnings on April 27. Analysts are forecasting revenue to suffer decline of -26.5 percent to $3.68B in the fiscal third quarter, while earnings are seen soaring by nearly -87.05 percent to $0.47 per share. It earned $1.45 per share, worse than the $1.51, adjusted, expected by Thomson Reuters consensus estimate. Revenue was $4.23B, worse than the $4.26B analysts expected. Earnings are estimated to increase by 429.4 percent this year, -3.46 percent next year and continue to increase by -9.5 percent annually for the next 5 years.

Let’s take a look at some insider activity at Western Digital Corporation (NASDAQ:WDC) and see the pattern. The earliest insider trade took place on 11/05/2018. Massengill Matthew E parted with a total of 1.68 thousand shares of company at average share price of $47.68. The total for the sales was set at $80.15 thousand. After this transaction, the Director account balance stood at 16.67 thousand shares. The stock lost -0.88 percent since that insider sale. On 08/06/2018, Long Mark P, Pres WD Capital, CSO & CFO, sold 3.45 thousand shares at a price per share of $68.36. This removed 235.64 thousand shares from the insider’s fortune and the stock saw a -30.87 percent retreat in value since the news became public. This transaction left 185.37 thousand shares in the Pres WD Capital, CSO & CFO account.

On 08/06/2018, EVP, Chief Legal Officer & Sec Ray Michael Charles performed a sale transaction worth $296.78 thousand. This sale at $67.65 each has eliminated 4.39 thousand shares from the insider’s portfolio position. Meanwhile, shares have recorded -30.14 percent decrease since the transaction was reported. The insider now is left with 100.85 thousand shares remaining in the account. Long Mark P, who performs the Pres WD Capital, CSO & CFO job, sold 24.94 thousand shares for $1.77 million. The disposal occurred on 07/30/2018 was priced at $70.83 per share. The share price plunged -33.28 percent since the reporting date. Long Mark P now left with a stake of 191.03 thousand WDC stock worth $9.03 million after the insider selling.

The stock is currently hovering around the first support level of $46.46. Below this, the next support is placed in the zone of $45.66. Till the time, the WDC stock trades above this level, bulls have nothing to fear. On momentum oscillators front, ‘RSI’ has touched 62.43 on daily chart, which may remain a cause for concern. If the price breaks below $45.66 level on closing basis, then we may see more profit booking and the stock may show further weakness. On the flipside, hitting the $47.94 mark may result into a pull-back move towards $48.62 level.

Shares of Western Digital Corporation (WDC) are trading at a P/E ratio of 20.3 times earnings reported for the past 12 months. The industry WDC operates in has an average P/E of 13.72. Its P/E ratio went as low as 10.9X and as high as 66.06 over the 5-year span.Further, it is sporting a 0.71 on the Price-to-Sales ratio. Compare this with the industry average P/S of 0.75. 33.5 percent is the gross profit margin for Western Digital Corporation and operating margin sits at 13.5 percent. Along with this, the net profit margin is 4.3 percent.