What Happened?
Shares of leading data storage manufacturer Western Digital (NASDAQ: WDC) jumped 8.8% in the morning session as semiconductor stocks, especially the memory chip manufacturers, surged after Micron reported impressive fourth-quarter earnings results. Micron beat across most of the key metrics we track, including revenue, operating profit, and EPS.
Notably, the company recorded a whopping 93% revenue growth compared to the previous year, showing that the AI party is still ongoing. Micron attributed the outperformance to the growing demand for memory chips that power generative AI applications. Looking ahead, Micron provided strong sales and profitability guidance for the next quarter, which exceeded Wall Street’s expectations. Overall, the result highlights the abundant growth opportunities for memory chip makers with technologies to accelerate the booming AI trend.
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What The Market Is Telling Us
Western Digital’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 11 months ago when the stock gained 14.8% on the news that the company reported first-quarter results that blew past analysts’ EPS expectations, driven by strong outperformance in its flash memory division. In addition, its inventory levels shrunk.
On the other hand, its operating margin fell, and its gross margin shrunk. Aside from the earnings print, Western Digital said it would separate its HDD and flash memory businesses into two independent, public companies.
The spin-off comes after activist hedge fund Elliot Management disclosed a nearly $1 billion stake in the company in the previous year. Elliot is known for pushing its portfolio companies to pursue value-added strategies for shareholders. The transaction was targeted for the second half of the calendar year 2024. Overall, it was a mixed quarter for the company.
Western Digital is up 37.9% since the beginning of the year, but at $70.12 per share, it is still trading 12.6% below its 52-week high of $80.24 from July 2024. Investors who bought $1,000 worth of Western Digital’s shares 5 years ago would now be looking at an investment worth $1,134.
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