What Happened?

A number of stocks jumped in the afternoon session after a new trade agreement between the United States and Japan spurred a broad market rally. 

The positive sentiment swept across markets after it was announced the U.S. and Japan had reached a new trade deal. The agreement included a 15% tariff on Japanese goods imported into the U.S. and a commitment from Japan to invest $550 billion in the U.S. and open its markets to American cars and agricultural products. This development boosted investor confidence and contributed to a widespread rally, lifting stocks across many sectors. The Dow Jones Industrial Average and the S&P 500 both posted gains, creating a favorable environment that likely benefited individual stocks.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Memory Semiconductors company Western Digital (NASDAQ: WDC) jumped 3.5%. Is now the time to buy Western Digital? Access our full analysis report here, it’s free.
• Advertising Software company AppLovin (NASDAQ: APP) jumped 3.2%. Is now the time to buy AppLovin? Access our full analysis report here, it’s free.
• Marine Transportation company Matson (NYSE: MATX) jumped 3.4%. Is now the time to buy Matson? Access our full analysis report here, it’s free.
• Defense Contractors company AeroVironment (NASDAQ: AVAV) jumped 3.3%. Is now the time to buy AeroVironment? Access our full analysis report here, it’s free.
• Specialized Technology company OSI Systems (NASDAQ: OSIS) jumped 3.3%. Is now the time to buy OSI Systems? Access our full analysis report here, it’s free.

Zooming In On Western Digital (WDC)

Western Digital’s shares are very volatile and have had 22 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 9 months ago when the stock gained 13.1% on the news that the company reported strong third-quarter earnings with significant gross margin improvement, which helped to beat on adjusted operating profit and adjusted EPS. 

Notably, the cloud segment (54% of overall revenue) contributed the most to the top-line outperformance, accelerating 17% sequentially and 153% year on year. This was powered by what management considered "higher nearline shipments in HDD and enterprise SSD bit shipments to data center customers" and more than offsetting softness in the client and consumer segments. While guidance for next quarter's revenue and adjusted EPS slightly missed Wall Street's estimates, the market seemed to overlook this.

Western Digital is up 12% since the beginning of the year, and at $69.28 per share, it is trading close to its 52-week high of $73.43 from December 2024. Investors who bought $1,000 worth of Western Digital’s shares 5 years ago would now be looking at an investment worth $1,501.

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