Mr. Nari, you are a big man! Comments on ASND WDC today fr Briefing.com
Ouch! Western Digital was trashed by the market (-9) after announcing that it would miss
the street's earnings estimates by a wide margin... That the company's disappointing forecast
($0.63-$0.66 v. $0.83) still leaves it with a year over year gain of 80%+ was totally ignored...
Also ignored was that the company sold a record number of drives in the quarter... Though the
current pricing climate is likely to keep margins/earnings under pressure over the next quarter,
the fact remains that WDC's time-to-market advantages should enable the company to
continue building share - particularly in the higher margined market segment... It should also
be noted that after plunging 18% in Tuesday's trading the stock now trades at 12x the
downardly revised earnings estimate of $3.30... Consequently, additional downside risk should
prove minimal.
While Ascend Communications held up better than Western Digital, that's not saying much...
One reason ASND didn't fall as far is that the street expected the networking company to
report weak figures... However, the extent to which the company expects to miss the street
estimate surprised a number of analysts - ourselves included... But with its production
difficulties largely behind it, look for revenue growth to reaccelerate in the quarters to come...
Nevertheless, lingering earnings fears and tax considerations should keep the stock from
staging a material recovery over the next few months... 6- to 12-months out, however,
Briefing expects the stock to be retesting the 45-50 area.
A silver lining?: Motorola, Gillette, Coca-Cola, all of which recently warned that earnings
would fall shy of expectations, have recovered most, if not all, of their lost ground in a
relatively short time frame... Hutchinson had done the same prior to Tuesday's WDC related
sell-off in the disk drive sector. |
