Western Digital Corporation WDC recently announced its preliminary financial results for the second quarter of fiscal 2025, which ended on Dec. 27, 2024. The company is scheduled to report fiscal second-quarter results on Jan. 29, 2025, after market close.

WDC’s Q2 Preliminary Results

Western Digital's revenues for the fiscal second quarter are expected to be at the mid-point of its previously issued guidance of $4.20 billion to $4.40 billion, which was given in the first quarter of fiscal 2025.

However, the company noted that its non-GAAP diluted earnings per share (EPS) are likely to be at the lower end of the prior guidance of $1.75 to $2.05. This adjustment reflects a more challenging pricing environment in Western Digital's flash business.

In the last reported quarter, Western Digital's Flash revenues rose 21% from the year-ago quarter and grew 7% sequentially. Uptrend demand for enterprise SSD products was driven by continued recovery in the datacenter.

Western Digital Corporation Price and Consensus

Western Digital Corporation price-consensus-chart | Western Digital Corporation Quote

Western Digital is one of the leading providers of broad range of HDD and Flash storage solutions used in desktop PCs, servers, network-attached storage devices, video game consoles, digital video recorders and a host of other consumer electronic devices.

Customer concentration, leveraged balance sheet and stiff competition from other major storage players remain major concerns limiting the growth prospects of Western Digital. For fiscal 2024, the company’s top 10 customers accounted for 39% of the company’s net revenues.

Western Digital has a leveraged balance sheet. As of Sept. 27, 2024, cash and cash equivalents were $1.71 billion, while long-term debt (including the current portion) was $7.4 billion.

Moreover, the company faces stiff competition from Seagate, Hitachi, Samsung and Intel in the storage market and from SSD pureplays such as Micron. The competition can lead to a decline in the average selling price (ASP). Any decrease in ASP will adversely impact the results if shipments do not improve considerably. The disk drive market is highly competitive and has experienced drastic pricing pressure due to supply/demand volatility. In the near future, hard disk companies might be exposed to pressures as customers, such as tablet PC makers choose flash cards for storage purposes instead of the customary hard disks. The situation may compel companies to cut hard disk prices, which may hurt margins.

WDC’s Zacks Rank & Stock Price Performance

Western Digital currently carries a Zacks Rank #5 (Strong Sell). Shares of the company have lost 11% in the past six months against the industry’s decline of 24.7%.

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Stocks to Consider

Some better-ranked stocks from the broader technology space are InterDigital, Inc. IDCC, NetApp, Inc. NTAP and Intrusion Inc. INTZ. IDCC presently sports a Zacks Rank #1 (Strong Buy), whereas NTAP & INTZ carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for InterDigital’s 2024 EPS is pegged at $15.19, unchanged in the past 30 days. IDCC earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 163.7%. The company’s long-term earnings growth rate is 15%. Its shares have jumped 39.3% in the past six months.

NTAP’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 6.53%. In the last reported quarter, Intrusion delivered an earnings surprise of 4.47%. The company’s long-term earnings growth rate is 7.2%. Its shares have surged 37.8% in the past year.

INTZ’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 43.06%. In the last reported quarter, Intrusion delivered an earnings surprise of 16.67%. Its shares have surged 75% in the past six months.

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