Why Western Digital Stock Popped Today
Shares of Western Digital (NASDAQ: WDC) were up 7.2% as of 3:45 p.m. ET Monday after the company announced better-than-expected quarterly results along with a plan to split into two separate public companies.
On Western Digital's better-than-feared quarter
Western Digital's headline numbers for its fiscal first quarter (ended Sept. 29, 2023) didn't look strong at first glance; revenue declined 26% year over year, to $2.75 billion, translating to an adjusted (non-GAAP) net loss of $554 million, or $1.76 per share. The latter included $225 million of "underutilization-related charges" taken during the quarter in Western Digital's flash and hard drive segments.
However, these results compared favorably to analysts' consensus expectations, which called for an even wider adjusted net loss of $1.90 per share on revenue of only $2.66 billion.
Western Digital CEO David Goeckeler credited the relative outperformance to "the team's efforts to bolster business agility and develop differentiated and innovative products across a broad range of end-markets."
On guidance, Western Digital's plan to split into two companies
Looking ahead to the current fiscal second quarter, Western Digital expects revenue ranging from $2.85 billion to $3.05 billion, with an adjusted net loss per share of $1.35 to $1.05. Here again, the midpoints of both ranges were well above Wall Street's estimates for a fiscal second-quarter net loss of $1.39 per share on revenue of $2.92 billion.
Finally, in a separate press release this morning, Western Digital also announced its board of directors has unanimously approved a plan to separate its hard drive and flash businesses into two independent, public companies. The move would presumably allow the individual businesses to hone their respective focuses and more effectively execute their distinct product development and growth plans.
"Importantly, separating these franchises will unlock significant value for Western Digital shareholders," Goeckeler said, "allowing them to participate in the upside of two industry leaders with distinct growth and investment profiles."
Assuming all goes as planned, Western Digital expects the separation will be structured as a tax-free spinoff with a targeted completion for the second half of calendar year 2024.
In the end, even with shares of Western Digital already up almost 30% year to date leading into this report, it's no surprise to see the stock continuing its rally in response today.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
