Western Digital (NASDAQ:WDC) shares fell after the company was downgraded to sell from neutral at Goldman Sachs, which pointed to a continued downturn in the flash memory market.
Analyst Toshiya Hari cut the firm's rating on Western Digital to sell from neutral and lowered the price target to $31 from $43, noting that pricing for NAND in recent days is now below "cash-cost," citing multiple sources, as companies attempt to work down inventories.
"Given our expectation for a severe memory industry downturn, and historically low trough gross margins by extension, we are downgrading Western Digital to Sell ... as we believe net leverage on the company's balance sheet is likely to come under greater scrutiny by investors, and may constrain operating activities in the near-term, presenting a risk to WD's post-cycle competitive position," Hari wrote in a note to clients.
Conversely, Hari reiterated the firm's buy rating on Micron Technology (NASDAQ:MU), noting that the dynamic random access memory market should lead to "normalized earnings" soon, due to "favorable competitive dynamics," even when accounting for recent pricing trends.
Analysts are largely cautious on Western Digital. It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY.
Additionally, Seeking Alpha's quant system, which consistently beats the market, rates WDC a HOLD.
WDC shares tumbled $3.00, or 8.4%, to $32.83.
