Furthermore fundamentals don't always tell the story. That's why WDC could still run higher even if its earnings and outlook fail to meet expectations.
Yes, that seems to me what happened following the Q4 results. The outlook was awful, and the shares went up. Investors at that time were trying to get ahead of the cycle bottoming and the stocks moving up as a result.
But eventually, fundamentals matter. It seems to me that the "Q2 is about flat with the bad Q1, and things improve from there" theory could easily get pushed out. And the NAND makers can only have revenues and EPS collapse for so long before, well, you wonder why a stock heading into potentially multiple quarters of negative EPS has a $50 share price, ya know?
We'll see. It seems like 5G cell phones could suck up a bunch of memory. And the cloud providers continues I suppose to have booming demand, once they finish burning through their inventory they've gotta resume purchasing. But, when bit prices are down ~50% or more from last year, it takes a hell of a resumption of purchasing to make up for the lower share price. I'm still waiting for client SSD sales to take over the remainder of the PC segment that currently consumes disk drives. That should eat up some NAND production, but for WDC it eat up their legacy disk sales, so it may not be an overall benefit for them in particular.
Interesting to watch as well. Who is correct? The buyer of WDC that pushed it from ~$38 up to $50 because the cycle has almost bottomed, and WDC is on its way back toward $80 over the next 18 months, or the sellers who think the cycle has a ways more down to go, and WDC has to cut costs, cut the dividend, cut production, burn cash and do it's best to survive in a cut throat industry which has another year of major price reductions ahead in order to burn through all the inventory on the balance sheet? Time will tell.
I don't think we get anything other than negative data points (increased inventory, perhaps more cuts in production from WDC) Monday afternoon, and the (already known) positive statements that production cuts should reduce supply, and the cloud customers and client SSD expansion will cause H2 demand to be above H1 demand. That's all known. Does it make it clear what's going to happen in NAND price declines versus a modest demand pickup relative to an awful H1? Not to me, but I'm watching to see....... |
