What Happened?

Shares of leading data storage manufacturer Western Digital (NASDAQ: WDC) fell 5.6% in the afternoon session after Management told investors during a technology conference that the business is experiencing pricing challenges that might persist. The company highlighted abundant inventories, which are likely to weaken demand for PCs and smartphones. The weak demand is also likely to impact semiconductor companies that supply critical chips for these computing devices.

The shares closed the day at $65.99, down 5.6% from previous close.

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What The Market Is Telling Us

Western Digital’s shares are somewhat volatile and have had 10 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 about 2 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 30.1% since the beginning of the year, but at $66.16 per share, it is still trading 17.5% below its 52-week high of $80.24 from July 2024. Investors who bought $1,000 worth of Western Digital’s shares 5 years ago would now be looking at an investment worth $1,231.

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