Western Digital earnings: Storage demand remains strong, so why isn’t the market seeing a share-price rebound?
Western Digital’s earnings report sent a broadly positive signal for the storage industry: revenue this quarter was $4.381 billion, up 55% year over year; adjusted gross margin was 58.1%, and the company expects it to rise to 60%–61% next quarter. At least based on the company’s guidance, near-term demand and profitability show no obvious signs of weakening.
The real thing to watch is the composition of growth. Capacity shipped this quarter rose about 22% year over year, while revenue increased 55%, indicating that improved pricing and product mix made a significant contribution. Storage makers are making money, but those profits also depend more heavily on pricing power.
That explains the market’s divided views: orders are strong right now, but will new supply in the future put downward pressure on prices? Recent concerns about Toshiba’s capacity expansion have already weighed on hard-drive stocks. However, there is still a process between expansion targets and actual deliveries, so it would be premature to conclude that supply and demand have already reversed.
For Seagate, this is a fairly direct confirmation of a strong industry cycle. For SanDisk, it signals that data-center storage demand remains strong, but HDD price increases should not be directly extrapolated to NAND. Whether SanDisk can continue raising its earnings outlook will depend on enterprise SSD revenue, NAND prices, and shipment volumes all coming through together.
My view is that this report supports continuing to watch for opportunities to go long in storage, but it is not enough to justify buying the dip right away. The most important things to watch next are whether the share price can stabilize after the strong guidance and whether peers’ earnings reports continue to confirm demand.
If capacity growth, firm pricing, and profit delivery all hold up, a pullback will be more worth investigating. If new supply starts pushing prices down or customers delay taking delivery, the outlook should be revised lower. In storage, the biggest risk is relying on today’s high profits to put a floor under tomorrow’s share price.#股票财报季
Western Digital’s earnings report sent a broadly positive signal for the storage industry: revenue this quarter was $4.381 billion, up 55% year over year; adjusted gross margin was 58.1%, and the company expects it to rise to 60%–61% next quarter. At least based on the company’s guidance, near-term demand and profitability show no obvious signs of weakening.
The real thing to watch is the composition of growth. Capacity shipped this quarter rose about 22% year over year, while revenue increased 55%, indicating that improved pricing and product mix made a significant contribution. Storage makers are making money, but those profits also depend more heavily on pricing power.
That explains the market’s divided views: orders are strong right now, but will new supply in the future put downward pressure on prices? Recent concerns about Toshiba’s capacity expansion have already weighed on hard-drive stocks. However, there is still a process between expansion targets and actual deliveries, so it would be premature to conclude that supply and demand have already reversed.
For Seagate, this is a fairly direct confirmation of a strong industry cycle. For SanDisk, it signals that data-center storage demand remains strong, but HDD price increases should not be directly extrapolated to NAND. Whether SanDisk can continue raising its earnings outlook will depend on enterprise SSD revenue, NAND prices, and shipment volumes all coming through together.
My view is that this report supports continuing to watch for opportunities to go long in storage, but it is not enough to justify buying the dip right away. The most important things to watch next are whether the share price can stabilize after the strong guidance and whether peers’ earnings reports continue to confirm demand.
If capacity growth, firm pricing, and profit delivery all hold up, a pullback will be more worth investigating. If new supply starts pushing prices down or customers delay taking delivery, the outlook should be revised lower. In storage, the biggest risk is relying on today’s high profits to put a floor under tomorrow’s share price.#股票财报季
