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With SanDisk Purchase Done, Western Digital Will Give New Guidance

Western Digital ( WDC ) will provide revenue and earnings guidance for the first time since completing its $16 billion acquisition of SanDisk. Western Digital announced the completion of its SanDisk acquisition on Thursday, creating a formidable competitor in both disk drives and flash-chip storage. The company says it will update its guidance on May 26, after the market close, for its fiscal fourth quarter ending July 1. The guidance will reflect the partial period of ownership of SanDisk in Q4. RBC Capital Markets analyst Amit Daryanani, in a research note, said he expects Western Digital to imply Q4 revenue guidance of $3.4 billion. That’s above the consensus estimate of $3.34 billion from analysts polled by Thomson Reuters. The Wall Street consensus on earnings per share minus items is 86 cents. Daryanani expects 93 cents. He has an outperform rating on Western Digital stock and a price target of 56. Western Digital was trading near 39, up 5%, in afternoon trading in the stock market today . But shares are down more than 20% since the company’s posted fiscal Q3 earnings on April 28. Western Digital and SanDisk had combined revenue of about $20 billion in 2015. Western Digital is the largest provider of disk drives, ahead of Seagate Technology ( STX ). Seagate was trading near 20, up 4%, Wednesday afternoon. The stock is down 24% since the company reported its fiscal Q3 earnings on April 29. SanDisk is a leading provider of chips used for data storage in a wide variety of devices, including smartphones, tablets and PCs. The deal will help SanDisk, which has a strong retail business, move up the ladder to make bigger sales to businesses and other enterprise customers — the market where Western Digital is strongest. Western Digital gets the ability to offer chip-based storage in areas where its disk drive technology is losing ground.

Applied Materials’ 3D ‘Tide’ Won’t Help It Outpace Rivals Lam, KLA

Applied Materials ( AMAT ) could surf the “rising tide” of 3D Nand, but rival Lam Research ( LRCX ) will likely outgrow the No. 2 chip-gear-maker, a Needham analyst said Wednesday ahead of Applied Materials’ Q2 earnings report, due after the close Thursday. In afternoon trading on the stock market today , Applied Materials stock was up 2%, near 20, leading soon-to-merge rivals Lam and KLA-Tencor ( KLAC ), whose shares were up 1.8% and 1%, respectively. The three trail ASML ( ASML ) in terms of market value. ASML stock was up 1% Wednesday afternoon. For its fiscal Q2 ended in late April, Applied Materials is expected to report $2.43 billion in sales and 32 cents earnings per share minus items, flat and up 10%, respectively, on a year-over-year basis. That would come off 4% declines for both metrics in Q1. Three months ago, Applied Materials guided to a 5%-10% sequential jump in sales ($2.37 billion to $2.48 billion) and 30-34 cents EPS ex items. Needham analyst Y. Edwin Mok reiterated his buy rating and 22 price target on Applied Materials stock. Mok and Credit Suisse analyst Farhan Ahmad both expect Applied Materials to report an in-line Q2. But Mok sees potential upside to Applied Materials’ Q3 guidance on strength in 3D Nand flash memory demand. Lam recently guided to 9% quarter-over-quarter shipment growth for Q2. Mok expects Applied Materials to “grow similarly, although likely at a slower pace than Lam.” He sees Applied Materials guiding to 2%-7% sequential growth for Q3 vs. consensus of 22 analysts polled by Thomson Reuters, which models 3% quarter-over-quarter sales growth. Ahmad, on the other hand, expects in-line Q3 guidance. For the second half of the year, display revenue could be guided up 10%-20% vs. last year’s flat quarter, but DRAM (dynamic random-access memory) guidance could disappoint. “DRAM second-half revenues could be ticked down to flat (vs. the prior period),” he wrote in a research report. “Expectations are relatively high. Most investors expect a beat than a miss,” but DRAM has been macroeconomically slogged for several years on slowing PC sales. He kept his outperform rating and 23 price target.

EA Scores Positive Reviews From Investor Day; Stock Gets PT Hike

Video game publisher Electronic Arts ( EA ) on Tuesday laid out its plan to add $1 billion in incremental revenue within the next three to five years. EA earned mostly positive reviews for its presentation at the company’s investor day event, held at its headquarters in Redwood City, Calif. Oppenheimer analyst Andrew Uerkwitz reiterated his outperform rating on EA stock but raised his price target to 88 from 78. EA stock was down 1%, near 74, in early afternoon trading on the stock market today . Electronic Arts shares hit an all-time high of 77.15 on Monday. “We came away more confident in EA’s growth strategy and ability to engage existing and potential customers with new tools,” Uerkwitz said in a research report Wednesday. “We believe secular tailwinds such as the move to digital and mobile will support multiyear margin expansion and profit growth for the company.” EA sees future sales growth coming from action games, shooter games and international expansion. It projects that digital growth, including sales of full-game downloads and extra content spending, will boost profitability. Another area of growth is e-sports. EA says competitive gaming initiatives will drive game sales, plus deliver advertising and sponsorship revenue. The next potential catalyst for EA is the E3 video game conference in mid-June, Piper Jaffray analyst Michael Olson said in a note Wednesday. He maintained his overweight rating on EA stock with a price target of 87. EA’s game lineup for its current fiscal 2017 is more attractive than last year’s slate, Olson said. Upcoming releases include “Mirror’s Edge Catalyst,” due out June 7, and “Battlefield 1,” due out Oct. 21. Also in the pipeline are “Titanfall 2,” scheduled for fiscal Q3, and “Mass Effect: Andromeda,” set for late Q4. EA’s fiscal 2017 started April 1. EA ended fiscal 2016 with non-GAAP revenue of $4.57 billion, up 6% year over year. Earnings per share minus items rose 25% to $3.14 in the just-closed fiscal year. EA isn’t the only video game stock trading just below its record high. Take-Two Interactive Software ( TTWO ), which reports fiscal Q4 earnings after the market close Wednesday, hit an all-time high of 38.52 on April 4. Activision Blizzard ( ATVI ) notched a record high of 39.93 on Dec. 29. Take-Two stock was down a fraction, below 36, and Activision stock was up 1%, near 38.50, in afternoon trading Wednesday. RELATED: EA Stock Soars Like ‘Star Wars’ Millennium Falcon After Q4 Beat .