Key points
- Western Digital supplies hard disk drives (HDDs) and solid state drives (SSDs) to data center and retail customers with plans to split the two divisions into separate companies.
- Western Digital saw AI accelerate recovery in the storage device sector as it raised its fiscal EPS guidance for the third quarter of 2024.
- Seagate Technology is the largest HDD manufacturer in the world and has increased HDD capacity by up to 3x with its heat-assisted magnetic recording (HAMR) technology, integrated into its 30TB HDD deployment.
- 5 titles we prefer to Western Digital
The boom in artificial intelligence (AI) has accelerated revenues for several IT and technology companies. The obvious benefactor and leader of the AI wave is Nvidia Co. NASDAQ:NVDA, with its 90% GPU market share. AI requires high processing power but also a huge amount of data to train AI models. This requires the ability to store oceans of data, as evidenced by the surge in revenue for Micron Technology Inc. NASDAQ:MU, manufacturer of DRAM, NAND and flash memory chips. The benefits continue to accrue to data storage companies that purchase mountains of memory storage chips to meet the insatiable demand of their businesses. Here are 2 major data storage device manufacturers that are thriving thanks to the AI boom while their lows are returning to highs.
Western digital
Western Digital Co. NASDAQ:WDC produces hard disk drives (HDD) and solid state drives (SSD). As a leader in the data storage industry, they moved to the forefront of SSDs with the acquisition of flash drive manufacturer SanDisk in 2016. Their products range from traditional HDDs, which are mechanical storage devices for storing mass data, to SSDs, which are faster and more reliable because they have no moving parts.
Western Digital also makes data center storage systems and consumer storage devices, including SSDs, USB drives, and external hard drives. Their business is booming with the trend of artificial intelligence. The company plans to separate its HDD, which focuses on traditional HD and mechanical storage solutions, and Flash business, focused on NAND flash memory, into two separate companies.
Artificial intelligence accelerates the breakthrough
Western Digital reported a fiscal loss of 69 cents per share per share in the second quarter of 2024, beating consensus analysts’ estimates for a loss of $1.12 by 43 cents. Revenue fell 2.4% year over year to $3.03 billion, beating consensus estimates of $3 billion. The surge in demand for data storage devices has prompted them to increase their forward guidance.
Raised guide
Western Digital raised forward guidance for the fiscal third quarter of 2024 to earnings per share of 10 cents and profit of 20 cents, crushing consensus estimates for a loss of 31 cents. Revenue is expected to grow from $3.20 billion to $3.40 billion, beating consensus estimates of $3.15 billion.
Relaunch guide
On March 5, 2024, at the Morgan Stanley Technology, Media & Telecom Conference, Western Digital announced that its fiscal third quarter 2024 EPS exceeded the high end of its previous guidance by 20 cents versus the 9 cents estimated by analysts. CEO Goeckeler noted that they achieved a best-in-class NAND gross margin of a significant amount. The HDD business has seen a return of hyperscalers in the US after “more robust conversions”. China recorded 100% sequential growth in HDD business.
Goeckeler commented: “If we look at the guidance ranges that we have provided, we expect to be close to the high end of the range that we have provided. But every company is performing better from a profitability perspective. A couple of points of additional gross margin in each activity. All other numbers are within indicative ranges. So we expect this quarter, on an EPS basis, to exceed the high end of our guidance range.”
Analyst update
Evercore was asked to initiate coverage on Western Digital with an Outperform with an $80 price target.
Western Digital Analyst Recommendations and Price Targets can be found on MarketBeat. Shares of Western Digital’s peers and competitors can be found with MarketBeat Stock Screener.
Ladder step bull daily banners
The daily candlestick chart on the WDC illustrates stepped bullish flag patterns. There are a series of 3 consecutive bullish flags, each making higher highs. The most recent bull flag formed after peaking at $65.92 on March 6, 2024, forming a parallel channel to $58.47 before gapping and rising to $69.36. The daily relative strength index (RSI) is attempting to rebound from the 70 band. The pullback support levels are at $63.72, $58.47, $54.79, and $52.89.
Seagate technology
Seagate Technology plc NASDAQ:STX is undoubtedly the leader in the HDD segment in the United States. The company continues to push the envelope with HDD technology in an effort to match SDD in speed and efficiency at a more affordable price. The SSD has no moving parts, while the HDD includes several mechanisms that must work perfectly to function. HDD capacity far exceeds SDD at much cheaper prices. However, AI requires speed and storage capacity, which gives the SSD an advantage, as indicated by the all-flash array storage solution provider Pure Storage Inc. New York Stock Exchange: PSTG AND Hewlett Packard Enterprise Co. NYSE:HPE results.
HAMR technology
Seagate Technology will launch its heat-assisted magnetic recording (HAMR) technology that will increase HDD storage capacity by up to 3 times. Capacity gains are achieved by doubling or tripling the area density of traditional HDDs, resulting in a significant increase on a single platter.
Potential capacity is 5 to 10 terabytes per square inch (Tbps) compared to current capacity of 1 Tbps to 2 Tbps. HAMR uses a small laser to heat a small spot on the hard drive, temporarily making it easier to write to and allowing the magnetic head to write data in a significantly smaller space than ever before. Obtain AI-powered insights on MarketBeat.
Mozaic 3+ HDD platform
Seagate announced that HAMR technology will be incorporated into its Mozaic 3+ HDD platform to support capacities of 30TB and above. Collaborated with Sony Inc. NYSE: SNE for its laser diode technology to increase data storage capacity while reducing operating expenses. The Mozaic 3+ platform will reach densities of 3TB per platter with a goal of reaching 4TB and 5TB+ per platter. They allow you to double your capacity in the same space and reduce embodied carbon per TB by 55%.
Seagate Technology analyst ratings and price targets I’m on MarketBeat.
Daily symmetrical triangle
The daily candlestick chart on STX illustrates a symmetrical triangle. The descending upper trend line formed at $100.44 on March 6, 2024. The ascending lower trend line formed at $83.53 on March 19, 2024. They meet at the apex point. STX should break out of the upper trend line or break out of the lower trend line before the apex point.
The daily RSI is starting to break below the 60 band. Pullback support levels are at $89.02, $83.53, $75.61, and $69.09.
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