A 'Down Cycle' Is Coming For Data Storage Stocks; A Bearish Analyst Is Not Sugar Coating His Reasons

• Benchmark analyst Mark Miller reiterated a Sell on Western Digital Corp (NASDAQ: WDC) and a $34 price target citing concerns over the strength and duration of the down cycle and weakening hyperscale.

• At an investor conference, Western Digital management indicated preparing for a down cycle driven by demand.

• NAND bit supply is currently exceeding demand, likely to grow around 20%.

• Inventory adjustments are underway, he noted. Supply and demand affected the flash margins the most.

• Management hoped for better visibility by next quarter. Since the last earnings call, things have gotten somewhat more challenging, he observed.

• Consistent with Seagate Technology Holdings PLC's (NASDAQ: STX) view, hyperscale customers became more cautious.

• Miller found Western Digital in a much stronger position to face a down cycle than the last, thanks to lower debt, greater access to capital, and a better mix.

• The firm is managing discretionary spending, slowing nodal transitions and capacity growth, he added.

• Miller downgraded WDC to Sell from Hold with a $34 price target just a week ago, citing cloud customer concerns and Asain economic trends.

• Miller noted that Seagate joined the likes of Micron Technology, Inc (NASDAQ: MU) and Nvidia Corp (NASDAQ: NVDA) in lowering outlooks. The analyst also downgraded Seagate to Hold from Buy.

• Price Action: WDC shares closed higher by 2.32% at $42.41 on Thursday.

• Photo via Wikimedia Commons

Latest Ratings for WDC

Date	Firm	Action	From	To
Mar 2022	Stifel	Maintains		Buy
Jan 2022	Mizuho	Maintains		Buy
Jan 2022	Barclays	Maintains		Equal-Weight

View More Analyst Ratings for WDC

View the Latest Analyst Ratings

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