Storage demand is not weakening, so the underperformance in Western Digital (NASDAQ:WDC) stock is unusual. WDC stock is on sale after the stock peaked in June at $78. The quarterly earnings report re-affirms the strong momentum ahead for the business.
WDC posted revenue growth of 14% Y/Y to $4.9 billion. It earned $2.16 a share (non-GAAP). For the next quarter, WDC expects revenue of between $4.9 billion to $5.1 billion. Its EPS will be $2.25 to $2.55 a share.
Markets did not react to Western Digital’s strong quarterly results. The NASDAQ is having tremendous resistance, failing to break out to new highs. WDC’s exceptional quarter needed to beat expectations to move higher. Smart investors should take advantage of the market by considering a position in this storage supplier.
WDC is paying down debt. It will introduce new technology in the storage market to sustain profitability. The free cash flow of $792 million suggests that WDC may resume its dividend, eventually. First, it must pay down its debt. It spent $213 million paying back debt in the last quarter. It also has plenty of liquidity of $5.62 billion. It has $2.25 billion in its undrawn revolver and $3.37 billion in cash and cash equivalents.
WDC stock is on sale. Wait for the selling pressure to weaken before buying the stock.
