Western Digital stock jumped Friday after the data storage company published a mixed fiscal first quarter earnings report. Earnings exceeded expectations while revenue came in slightly lower than what analysts expected, but still represented a 49% year-over-year jump.
Western Digital said late Thursday that it earned an adjusted $1.78 per share on sales of $4.1 billion for the September-ended quarter. Analysts polled by FactSet projected the San Jose, Calif.-based company would post adjusted earnings of $1.71 per share on sales of $4.2 billion.
For the same period a year earlier, Western Digital posted an adjusted loss of $1.76 per share on sales of $3 billion.
On the stock market today, Western Digital stock gapped up more than 9% to 72.42.
Cloud Boost For Western Digital
Western Digital is one of the largest makers of hard disk drives in the world. It is also among the market leaders in flash data storage products.
The company's sales growth was helped by strong demand from cloud service providers. Sales from the company's cloud division soared 153%, which the company attributed to increasing shipments to data center customers.
In June, Western Digital announced a "six-stage AI Data Cycle framework" focused on AI-related data storage.
"With the continued proliferation of the AI Data Cycle, our Flash and HDD product portfolios are well-positioned to capitalize on significant opportunities as adoption continues to grow," Chief Executive David Goeckeler said in a news release.
For the current quarter, Western Digital guided for sales of $4.3 billion at the midpoint of its range. Prior to the company posting its results, analysts were projecting $4.3 billion in sales for the December-ending quarter, according to FactSet.
In October 2023, the company announced plans to spin off its flash and hard-drive businesses. On the company's earning call Thursday, Goeckeler said the firm expects to "execute the separation" following the close of Western Digital's December-ending fiscal second quarter.
Analysts See 'Solid Numbers' For Western Digital
The company's shares have gained 68.8% over the past 12 months, compared to a 37% gain for the S&P 500. The stock has been helped by Western Digital's sales and earnings bouncing back from a hard drive industry slowdown that sank the company's earnings starting late in 2022.
Following the report, Morgan Stanley analyst Joseph Moore wrote that Western Digitial's "solid numbers" helped answer some concerns about the market for NAND flash storage. Moore reiterated a positive overweight rating for Western Digital and increased Morgan Stanley's price target to 100 from 94.
"We are somewhat relieved that numbers are intact in a quarter where there is some nervousness on NAND volume and pricing, at least outside of cloud applications," Moore wrote. "But ultimately, this stock is materially undervalued regardless of where we are in the NAND cycle, and that will become clear as we approach the separation."
Evercore ISI analyst Amit Daryanani also reiterated a positive outperform call for Western Digital following the report.
"Investors will continue to debate the sustainability of current results, but the inline revenue guide for the Dec-quarter should alleviate concerns about a near-term downturn in the flash market," Daryanani wrote to clients.
Western Digital Stock: Technical Ratings
Prior to earnings, Western Digital stock fell a fraction to 66.32 in regular trading Thursday.
Coming into the report, Western Digital stock had an IBD Composite Rating of 65 out a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Western Digital's IBD Relative Strength Rating was 63 out of 99. The RS Rating means that Western Digital has outperformed 63% of all stocks in IBD's database over the past year. IBD typically recommends focusing on stocks with an RS rating of 80 or higher.
