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Will Western Digital Buy a Minority Stake in Toshiba Unit?
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Western Digital Corporation (WDC - Free Report) reportedly is in active talks with Toshiba to acquire a stake in the latter’s semiconductor unit. As reported by Nikkei, the Japanese conglomerate is considering to spin-off the unit by the end of the first half of 2017.
Toshiba – which is staring at a massive impairment loss in its U.S. nuclear power unit – has been mulling to divest 20% of the profitable unit for 200–300 billion yen (roughly $1.77–$2.65 billion). The sell proceeds will help the company to cope with the massive impairment loss.
Apart from Western Digital, the semiconductor unit has also attracted some of the U.S. investment funds. However, we believe Western Digital holds an edge over others due to Sandisk’s (acquired in 2016) long term relationship with Toshiba. Notably, the companies together operate a flash memory plant in the Mie Prefecture city of Yokkaichi.
Stake Buy to Benefit Western Digital
The growing storage demand across applications such as consumer electronics and enterprise storage sectors have significantly driven the NAND flash memory market, particularly 3D NAND memory. According to Allied Market Research, the market is anticipated to grow at a CAGR of 33.7% to $39 billion over 2014–2022.
As per data available from Statista, Samsung was the #1 player in the segment with 36.3% share followed by Toshiba (20.1%) and Western Digital (16.1%) at the end of the second quarter of 2016.
We believe that the stake buy will not only strengthen Western Digital’s presence in the 3D NAND flash memory market but also provide it a competitive edge over U.S.-based competitors like Micron (MU - Free Report) and Intel (INTC - Free Report) .
Estimates Rising
Notably, Western Digital has delivered three positive earnings surprises in the last four quarters with an average beat of 5.87%. Moreover, in the last 30 days, current year estimates have moved upward by 29 cents (5.3%) to $5.72.
The upside reflects the positive affect of recently revised the second quarter of 2017 guidance. Western Digital cited favorable product mix, continued strong acceptance of its products, solid sales execution and favorable market conditions for the upgrade in guidance. The renewal of the eight-year cross-license patent agreement with Samsung also drove the estimates in our view. (Read More: Western Digital Stock Rises on Upbeat Q2 Guidance)
Notably, in the last one-year Western Digital has yielded a return of 54.2%, outperforming the Zacks Computer-Storage Devices industry’s return of 41.6%.
Seagate's long-term earnings growth is currently pegged at 8.8%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Will Western Digital Buy a Minority Stake in Toshiba Unit?
Western Digital Corporation (WDC - Free Report) reportedly is in active talks with Toshiba to acquire a stake in the latter’s semiconductor unit. As reported by Nikkei, the Japanese conglomerate is considering to spin-off the unit by the end of the first half of 2017.
Toshiba – which is staring at a massive impairment loss in its U.S. nuclear power unit – has been mulling to divest 20% of the profitable unit for 200–300 billion yen (roughly $1.77–$2.65 billion). The sell proceeds will help the company to cope with the massive impairment loss.
Apart from Western Digital, the semiconductor unit has also attracted some of the U.S. investment funds. However, we believe Western Digital holds an edge over others due to Sandisk’s (acquired in 2016) long term relationship with Toshiba. Notably, the companies together operate a flash memory plant in the Mie Prefecture city of Yokkaichi.
Stake Buy to Benefit Western Digital
The growing storage demand across applications such as consumer electronics and enterprise storage sectors have significantly driven the NAND flash memory market, particularly 3D NAND memory. According to Allied Market Research, the market is anticipated to grow at a CAGR of 33.7% to $39 billion over 2014–2022.
As per data available from Statista, Samsung was the #1 player in the segment with 36.3% share followed by Toshiba (20.1%) and Western Digital (16.1%) at the end of the second quarter of 2016.
We believe that the stake buy will not only strengthen Western Digital’s presence in the 3D NAND flash memory market but also provide it a competitive edge over U.S.-based competitors like Micron (MU - Free Report) and Intel (INTC - Free Report) .
Estimates Rising
Notably, Western Digital has delivered three positive earnings surprises in the last four quarters with an average beat of 5.87%. Moreover, in the last 30 days, current year estimates have moved upward by 29 cents (5.3%) to $5.72.
Western Digital Corp. Price and Consensus
Western Digital Corp. Price and Consensus | Western Digital Corp. Quote
The upside reflects the positive affect of recently revised the second quarter of 2017 guidance. Western Digital cited favorable product mix, continued strong acceptance of its products, solid sales execution and favorable market conditions for the upgrade in guidance. The renewal of the eight-year cross-license patent agreement with Samsung also drove the estimates in our view. (Read More: Western Digital Stock Rises on Upbeat Q2 Guidance)
Notably, in the last one-year Western Digital has yielded a return of 54.2%, outperforming the Zacks Computer-Storage Devices industry’s return of 41.6%.
Zacks Rank & Key Picks
Western Digital sports a Zacks Rank #1 (Strong Buy). Seagate (STX - Free Report) is another stock worth watching in the sector as it also sports the same rank. You can see the complete list of today’s Zacks #1 Rank stocks here.
Seagate's long-term earnings growth is currently pegged at 8.8%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>