Last year I predicted that Western Digital (WDC) would make a move into the 20s. I ended up selling WDC late last year because a number of analysts were pushing the stock back down to the low 20’s (probably so they could buy more).
There was mention of inventory being too high and solid state drives would be a thing of the past as flash drives would overtake the market. Well, I guess they were misguided. This stock has since mushroomed to almost $39 a share and my new Dell laptop has a solid state drive.
I believe inventory will get ahead of sales projections towards the fall season. The almost but not necessarily recession should start to hit personal computer, laptop, and digital video recorder sales later this year as inflated oil and high food prices have caused deflated wallets, and as a result discretionary spending will continue to decline throughout the rest of 08. DVR sales may continue to rise…but that’s because cable and satellite operators are practically giving them away, which means decreased margins for companies like WDC. PC and laptop prices continue to decline as well. I can buy two laptops for what one used to cost in 1995.
Now the last time WDC nearly crashed in 2002, me…the then misguided investor was left holding the bag. Inventory was a big issue back then for WDC and I predict the same thing will happen again. This company is still very well run and has a bright future; they just need to keep growth and inventory in check. Oh…and a dividend would be nice.
I would buy WDC at $33 a share, I certainly would not buy at the current level.
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