Markets often punish cyclical semiconductor firms so much that valuations fall by too much. Western Digital (WDC) bottomed at $30.00 at the end of 2022. The market braced for a severe downturn in demand for storage.
WDC responded by restarting merger talks with Kioxia. Japan’s Kioxia is owned by Bain Capital, a private-equity firm. A merger would be worth more than $20 billion. Kioxia is the world’s second-largest maker of NAND flash memory. In the last few years, the computer sector transitioned to high-speed flash storage. Demand accelerated during the Covid lockdown.
After the lockdown eased and the economy slowed, sales plunged. Inventory for storage is rising. Micron (MU) reported a loss and cited a glut in inventory. It also expects to lose money again this quarter.
WDC has good value at this price.
Crowdstrike (CRWD) is on the opposite spectrum to WDC stock. The cybersecurity firm cannot close big contracts fast enough. Customers are taking longer to sign deals as pressure to cut costs mount.
CRWD stock is a buy if prices improve. The stock trades at a price-to-earnings ratio of 63 times. Ongoing inflationary pressures and persistently high interest rates will pressure Crowdstrike’s valuation. Cautious investors should be wary of holding CRWD stock.
