A weak outlook from the semiconductor market spread fear to storage suppliers. This is due to hard disks and solid state drives being commodities in the tech sector. The weaker the growth, the lower the prices for storage, putting pressure on profitability. Yet Western Digital (NASDAQ:WDC) is becoming a more attractive income investment. IS that enough to limit the stock from falling further?
Analysts ganged up against WDC stock last week, downgrading it ahead of its earnings report. Wells Fargo set a $65 price target, down from $75, citing revenue and earnings bottoming in the upcoming quarterly report. It lowered its view for the upcoming earnings report (for Jan. 24) and for the quarter that follows.
Analysts set a lowered outlook too late: WDC stock is already down around 60% from yearly highs. Plus, the secular growth in computing continues to put pressure on long-term storage supplies. Once demand accelerates again, supply will dwindle, setting Western Digital up for a rally on the markets.
Investors holding WDC stock now get a good dividend yield. The dividend is unlikely to get cut and will not be a factor in setting the stock’s "bottom." Fundamentals will eventually improve and that will bring back the stock buyers.
