Western Digital Gains Ground On Review Of Strategic Alternatives

Key Insights

  • Western Digital announces that it will review strategic alternatives following the pressure from an activist investor Elliott Investment Management. 
  • The company may separate its Flash and HDD businesses to boost value for shareholders. 
  • The announcement may serve as a material positive catalyst for Western Digital stock in the upcoming weeks. 

Western Digital Reviews Strategic Alternatives

Shares of Western Digital gained upside momentum after the company announced that it was “reviewing potential strategic alternatives aimed at further optimizing long-term value for its shareholders”.

Western Digital will evaluate a range of alternatives, including options for separating its Flash and HDD franchises.

This announcement is a result of the pressure from the activist investor Elliott Investment Management, which is trying to unlock more value for shareholders.

The general idea behind spin-offs is that separate businesses will get a higher valuation from markets. Not surprisingly, traders like the idea, so Western Digital stock opened with a gap up today and made an attempt to settle above multi-month highs.

What’s Next For Western Digital Stock?

Analyst estimates for Western Digital have been moving higher in recent months. Currently, the company is expected to report earnings of $7.72 per share in 2022 and $8.96 per share in 2023, so the stock is trading at 7 forward P/E.

Western Digital stock has moved away from yearly lows due to Elliott’s engagement. To have more upside, the company must present a plan. It should be noted that Western Digital and Elliott have signed a non-disclosure agreement, but rumors typically emerge during such processes.

The stock is trading at cheap valuation levels, so Western Digital has a decent chance to gain additional upside momentum in the upcoming weeks as some traders could be willing to bet on the success of the potential spin-offs.

To keep up with the latest earnings updates, visit our earnings calendar.

Best Computer Hardware Stocks To Buy In May

Key Insights

  • Worries about PC demand have failed to put pressure on HP and Western Digital in recent weeks. 
  • Earnings estimates for HP remained stable despite China’s decision to push foreign PCs out of government agencies and state firms. 
  • Western Digital stock has recently received a boost from activist investor Elliott Management. 

While many traders were worried about declining PC demand after the end of the acute phase of the coronavirus pandemic, some computer hardware stocks managed to show strength despite general market weakness. Importantly, these stocks continue to trade at attractive valuation levels.

Western Digital

Western Digital rallied at the end of May after activist investor Elliott Management stated that the stock could reach $100 by the end of 2023 and offered $1 billion of incremental equity capital into the Flash business at an enterprise value of $17 to $20 billion.

Elliott Management believes that this incremental capital could be “utilized either in a spin-off transaction or as equity financing in a sale or merger with a strategic partner”.

The presence of an activist investor often helps the stock, so it’s not surprising to see that Western Digital got a material boost. It’s just the beginning of the story so traders should expect that more information would become available in the upcoming weeks and months.

Meanwhile, analyst estimates keep moving higher, and the company is expected to report earnings of $9.23 per share in the next year. Thus, the stock is trading at less than 7 forward P/E, which is cheap.


HP stock has recently moved closer to yearly highs. Analyst estimates have been mostly stable in recent months, and the stock is currently trading at 9 forward P/E.

China has recently decided that foreign PCs should be kicked out of government agencies and state firms, which may hurt HP sales. Foreign PCs should be replaced with domestic ones within two years, so it remains to be seen whether HP sales will suffer an immediate blow.

Analysts have mostly ignored China’s move, and their estimates for 2023 remained stable. Meanwhile, the market is focused on the company’s attractive valuation so HP stock may gain solid upside momentum in case it manages to settle above the psychologically important $40 level.

To keep up with the latest earnings updates, visit our earnings calendar.

Best Computer Hardware Stocks To Buy Now

Key Insights

  • Computer hardware stocks are trading at attractive valuation levels. 
  • Markets are worried about demand after the end of the pandemic. 
  • However, some stocks have already started to rebound as they look too cheap to ignore. 

The computer hardware segment has been under pressure since the beginning of this year as traders were worried that PC demand would decline after the pandemic. Indeed, analyst estimates for the stocks in this segment have started to move lower in recent months. However, some stocks are trading at reasonable valuation levels and may attract speculative traders.


HP   stock has recently attracted traders’ attention after Berkshire Hathaway reported an almost 10% stake in the company.

Analyst estimates have been mostly stable in recent weeks. Currently, HP is expected to report earnings of $4.27 per share in the current year and earnings of $4.39 per share in the next year, so the stock is trading at roughly 8 forward P/E, which looks cheap in the current market environment.

The key question is whether analyst estimates start to move lower due to the worries about the health of the global economy. If earnings estimates remain stable, HP stock may get more support.

Western Digital

Western Digital stock is down by more than 20% year-to-date. Analyst estimates have been moving lower in recent weeks, and the company is expected to report earnings of $8.97 per share in the fiscal 2023. Thus, the stock is trading at less than 6 forward P/E, which is certainly cheap.

The company’s valuation looks attractive, and the stock has started to rebound despite the general market sell-off. This rebound would continue in case the company’s quarterly report, which is scheduled to be released on April 28, exceeds market expectations.

For a look at all of today’s economic events, check out our economic calendar.

Western Digital-Kioxia In Talks to Create Chipmaker Giant

The companies could reach an agreement as early as mid-September, and Western Digital CEO David Goeckeler would run the combined firm, the person said, requesting anonymity to discuss confidential matters.

The Wall Street Journal reported the talks earlier on Wednesday. Kioxia Holdings Corp and Western Digital both told Reuters they do not comment on speculation about mergers.

A combination of the two would rewrite the competition to capture robust demand for memory chips that has been driven by 5G expansion and a pandemic-fueled rise in work from home.

While Samsung dominates with over a third of the NAND market, according to research firm TrendForce, Kioxia has a nearly 19% share and Western Digital 15%. South Korea’s SK Hynix Inc and U.S. firms Micron Technology Inc and Intel Corp are the other large players.

“Such a deal would be a defensive, but prudent, move by Western to reinforce its competitive position in the swiftly consolidating chip market,” Morningstar analyst William Kerwin said in a research note.

“In the long term, we expect the NAND market to … consolidate down to about three leading players for a largely commodity-like product,” Kerwin said.

The memory chip industry is already consolidating, with Hynix agreeing to buy Intel’s NAND business for $9 billion last year, a deal still awaiting anti-trust clearance.

A Western Digital-Kioxia merger is also likely to draw anti-trust scrutiny in several countries, including in the United States and China.

Monopoly concerns and a years-long trade conflict between the United States and China have scuppered deals in the past few years.

Qualcomm Inc, for instance, walked away from a $44 billion deal to buy NXP Semiconductors after failing to secure Chinese approval in 2018, and Nvidia Corp’s planned $40 billion acquisition of British chip designer ARM hit a major hurdle last week in the UK.

Chinese antitrust watchdog State Administration for Market Regulation did not immediately respond to a request for comment on approval for a potential Western Digital-Kioxia deal.


In Japan, the two companies jointly produce NAND chips, which don’t need power to retain data and are used in smartphones, TVs, data center servers and public announcement display panels.

“For privately held Kioxia, we think $20 billion or more would secure a solid return,” Morningstar’s Kerwin said.

Kioxia, sold by Toshiba Corp in 2018 to a consortium led by Bain Capital for $18 billion as Toshiba Memory Corp, shelved plans last year for what would have been Japan’s largest initial public offering in 2020.

An IPO is still a possibility should Kioxia fail to reach a deal with San Jose, California-based Western Digital, the source told Reuters. Financial magazine Diamond in June said Kioxia was planning an IPO as early as September.

Kioxia said in its statement to Reuters on Thursday that it was considering the appropriate timing for an IPO.

Toshiba, which still owns about 40.6% of Kioxia, is in talks with at least four global private equity firms to seek their ideas for a new strategy, Reuters reported on Wednesday, citing sources.

Toshiba’s shares were up 1.3% in afternoon trading.

Western Digital’s shares closed up 7.8% on Wednesday, giving it a market capitalization of more than $20 billion.

Toshiba said it was not involved in the management of Kioxia and not in a position to comment. It said it continues to consider the most appropriate approach to its investment in Kioxia to maximize shareholder value.

Bain was not immediately available for a comment.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Eva Mathews in Bengaluru, Krystal Hu in New York and Makiko Yamazaki in Tokyo; Additional reporting by Brenda Goh in Shanghai; Writing by Sayantani Ghosh; Editing by Stephen Coates and Tom Hogue)

Few US Stocks That Could Brighten Up Your Portfolio

Markets are really quiet recently and that is why we will shift our focus towards the American Stocks, coming in right on time as Axiory have increased their product offering by introducing CFD stocks on MT4. This can significantly help you diversify your portfolio and take advantage of more trading opportunities.

Apple is testing the upper line of the symmetric triangle.

Home Depot locked in the sideways trend, waiting for a breakout.

McDonald’s defending the neckline of the H&S formation.

Netflix aiming for the lower line of the rectangle.

Pfizer with a false bullish breakout.

Prudential enjoying the buy signal after the breakout of the upper line of the triangle.

Tesla testing the lower line of the triangle.

Western Digital with a fresh buy signal coming from the breakout of a major resistance.

Micron Technology enjoying a proper buy signal after making new long-term highs.

For a look at all of today’s economic events, check out our economic calendar.

Stock Pick Update: October 21 – October 27, 2020

In the last five trading days (October 7 – October 13) the broad stock market has retraced a half of its previous week’s advance of almost 4%. The S&P 500 index set a new record high of 3,588.11 on September 2. But then the market fell below February 19 high of 3,393.52. Recently it set a local low of 3,209.45 before going back above 3,500 mark. So, the decline still looks like a downward correction of a 63.7% rally from March 23 corona virus low at 2,191.86.

The S&P 500 index has lost 2.06% between October 14 and October 20. In the same period of time our five long and five short stock picks have gained 0.08%. So stock picks were relatively stronger than the broad stock market . Our long stock picks have lost 0.54% and short stock picks have resulted in a gain of 0.69%.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • October 20, 2020

Long Picks (October 14 open – October 20 close % change): CSCO (-1.63%), NI (+2.03%), CMG (+1.38%), XOM (-1.06%), SHW (-3.41%)
Short Picks (October 14 open – October 20 close % change): WMB (+1.33%), APD (-1.83%), JPM (+0.07%), NVDA (-4.51%), WEC (+1.47%)

Average long result: -0.54%, average short result: +0.69%
Total profit (average): +0.08%

  • October 13, 2020

Long Picks (October 7 open – October 13 close % change): CMS (+2.71%), RTX (+0.35%), EQIX (+4.46%), OKE (+8.35%), FB (+6.53%)
Short Picks (October 7 open – October 13 close % change): COP (+4.21%), TWTR (+2.02%), NVDA (+1.78%), AWK (+1.39%), FDX (+3.37%)

Average long result: +4.48%, average short result: -2.55%
Total profit (average): +0.96%

  • October 6, 2020

Long Picks (September 30 open – October 6 close % change): SO (+7.13%), SEE (+9.80%), MAS (-2.17%), EOG (-1.23%), FB (-1.27%)
Short Picks (September 30 open – October 6 close % change): CVX (+0.07%), VZ (0.00%), MS (+0.15%), PPL (+5.90%), NEM (-2.67%)

Average long result: +2.45%, average short result: -0.69%
Total profit (average): +0.88%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, October 21 – Tuesday, October 27 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (October 21) and sold or bought back on the closing of the next Tuesday’s trading session (October 27).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Utilities, 1 x Technology, 1 x Consumer Discretionary
  • sells: 1 x Energy, 1 x Materials, 1 x Financials

Contrarian approach (betting against the recent trend):

  • buys: 1 x Energy, 1 x Materials
  • sells: 1 x Utilities, 1 x Technology

Trend-following approach

Top 3 Buy Candidates

PPL PPL Corp. – Utilities

  • Stock broke above medium-term downward trend line – uptrend continuation play
  • Possible short-term uptrend continuation pattern – bull flag
  • The resistance level is at $29 and a close support level is at $27.50

WDC Western Digital Corp. – Technology

  • Stock broke above its recent downward trend line – possible short-term uptrend continuation
  • The resistance level of $45
  • The support level is at $39

WYNN Wynn Resorts Ltd – Consumer Discretionary

  • Possible breakout above short-term downward trend line
  • The resistance level of $77.50
  • The support level is at $67.50-70.00

Summing up , the Utilities, Technology and Consumer Discretionary sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above analysis, and we encourage you to read today’s Stock Pick Update. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *


All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


Western Digital Jumps After Bernstein Outperform Rating

Western Digital Corporation (WDC) gained 4.82% Wednesday after Bernstein initiated coverage of the data storage firm’s stock with an ‘Outperform’ rating and $60 price target. The bullish call indicates a 36% premium to Wednesday’s $44.07 close.

Analyst Mark Newman belies the company’s strategic diversification into NAND flash memory through its 2015 acquisition of SanDisk positions it to take advantage of a shift in data storage management from local storage to data centers. He sees NAND flash memory devices growing 35% a year on average over the next decade.

‘NAND will capture the majority of growth due to its performance, power and form-factor advantages over HDDs,’ Newman wrote in a note to clients cited by Barron’s. ‘Mission-critical data-center storage will shift to 100% NAND by 2024,’ he added.

The analyst argues the current stock price undervalues the company’s NAND business.  He says its implied valuation of $4.4 billion represents just 25% of the $19 billion the company forked out to acquire SanDisk. The firm trades around seven times future earnings, well below its five-year average multiple of nine times earnings. As of July 15, Western Digital stock has a $13.31 billion market capitalization and is down almost 30% this year.

Quarterly Earnings Approach

Analysts expect the company to disclose fiscal fourth-quarter earnings of $1.01 per share when it reports after the closing bell on Wednesday, Aug. 5. In the third quarter, the firm’s data center devices and solutions segment increased 22% year-over-year amid growing demand for enterprise SSDs and double-digit terabyte drives. Traders should watch for continued strength in this business after Bernstein’s bullish outlook on data storage growth.

Wall Street Outlook

Analysts overwhelmingly support the stock, with 18 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 11 ‘Hold’ ratings. Currently, no research firm advises selling the company’s shares. Price targets fluctuate between $45 and $90, with the consensus coming in at $61.45. Given the favorable Wall Street view, watch for a possible runup into Western Digital’s next earnings report as traders bet on a better-than-expected quarter.

Technical Outlook

Despite sitting under a death cross, the stock has remained in a trading range since late March. More recently, a descending triangle has formed over the past six weeks to establish crucial support and resistance areas. Yesterday’s breakout above the pattern’s upper trendline may see bulls test the downward sloping 200-day SMA around $51. Conversely, a breakdown below the triangle could trigger a decline to the trading range’s lower boundary at $37.5.

WDC Chart