WDC - Western Digital

[walkie518]

WDC has been beaten up since Samsung announced a ramp of flash production along with the semi-loss on the Bain-Toshiba front and the market appears to price a peak in the storage cycle.

 

What I find so short-sighted is that when the cost/bit declines, the market has palpitations.  This should be expected since there are steady advancements in storage technology.

 

And sure there are many other, new storage methods that have not been commercialized, but we are farther than closer from Goolge using DNA to store NoSQL databases.

 

How bad does it need to get before the market appreciates?

 

WDC is sitting on $5B of cash while generating $4B of operating cash flow yet sports a $19B market cap. 

 

The new accounting favors management over shareholders in some regards, but it doesn't change the economics of the business.  As far as I can tell, WDC is still the leader by both technology and dollars as far as hard disks are concerned.  Samsung is a real competitor of the old SanDisk, but the ratio of cost per bit for platters and chips have remained fairly constant...WDC's MAMR should hit back fairly hard in this respect.

 

Has anyone else been looking into this in the mid-$60/sh range? 

[Gilp]

It starting to look interesting.

I've started following them, but have to do some homework first.

 

Main concern is that memory market is cyclical, and now it seems that we are in the beginning of bearish market for flash storage, i.e oversupply.

 

So it is really significant to understand the market dynamics first and understand the industry first.

Current earning may evaporate fast and are not a good prediction of the future.

[petec]

It's on 8.4x the average of the last 5 years FCF, for what it's worth. Trough FCF grew 10% over the last cycle (comparing 2016 with 2011) and peak FCF grew 6.5% (comparing 2018 with 2012).

 

That's obviously a very basic way of looking through the cycle but might be of interest.

 

8.4x strikes me as cheap if you know the industry and are confident this business has a terminal value.

[walkie518]

It's on 8.4x the average of the last 5 years FCF, for what it's worth. Trough FCF grew 10% over the last cycle (comparing 2016 with 2011) and peak FCF grew 6.5% (comparing 2018 with 2012).

 

That's obviously a very basic way of looking through the cycle but might be of interest.

 

8.4x strikes me as cheap if you know the industry and are confident this business has a terminal value.

I would note that figures are not apples-to-apples b/c there were some accounting changes over the last couple years

 

likely getting cheap on the back of the Chinese tariffs, but the stock looks pretty cheap here and it's unclear what sales will look like?  Will BABA buy less than what's needed to expand growth of storage containers?  Probably not, maybe there's a resourceful way for BABA et al to make this work, but I don't see how it's more economical to buy $/bit greater than top of the line MAMR product?

[Liberty]

For reference, previous discussion of WDC:

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/western-digital-seems-extremely-cheap/

[tat2507]

I am seeing a non-recurring loss this year equal to about 12.53 per share. I am also seeing some pretty large non-recurring losses in past years as well. Can anyone explain what these are? and are they really non-recurring if they are happening every year?

I am having trouble trying to decipher whether the stated 2.12 EPS (gurufocus) is correct or if the 14.73 EPS is correct (valueline).

[walkie518]

I am seeing a non-recurring loss this year equal to about 12.53 per share. I am also seeing some pretty large non-recurring losses in past years as well. Can anyone explain what these are? and are they really non-recurring if they are happening every year?

I am having trouble trying to decipher whether the stated 2.12 EPS (gurufocus) is correct or if the 14.73 EPS is correct (valueline).

diluted EPS for 12 months ending Jun 29, 2018 was $2.20/sh

 

there were a few items of note for WDC of which an investor should be aware from the last few years: (1) costs associated w/floods in Thaliand, (2) SanDisk acquisition, (3) Toshiba-related legal costs, and (4) payments associate with new facilities

 

GAAP and cash flow show two different companies since WDC declares $2B of deprec

 

2018 also shows paper losses resulting from cash premium to extinguish debt plus write-off of issuance costs that otherwise would be amortized

[MrB]

Investor Day links.

Good presentation and commentary

http://investor.wdc.com/investor-relations