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Western Digital Gets Upgrade, As New Era With SanDisk Begins

Western Digital ( WDC ) on Tuesday received a price-target hike to 50 from 45 and an upgrade to outperform from market perform by Cowen analyst Karl Ackerman. The moves comes two days before Western Digital is slated to give new guidance that will include its $16 billion acquisition of SanDisk. Western Digital announced the completion of its SanDisk acquisition last week, creating a big competitor in both disk drives and flash-chip storage. The company has said it would update its guidance after the market close Thursday for its fiscal fourth quarter ending July 1. Ackerman says while he expects the SanDisk acquisition to dilute earnings through 2017, “We think the stock should start to work higher from here, as Western Digital’s updated guidance should act as a positive catalyst and help eliminate uncertainty.” Western Digital stock was above 42, up more than 4%, in afternoon trading in the stock market today . However, the stock is down 47% since the acquisition was announced in October. Shares hit a four-year low of 34.99 on May 16 but are up 20% since then. Western Digital and SanDisk had combined revenue of about $20 billion in 2015, with $14.5 billion from Western Digital. It’s the largest provider of disk drives, ahead of Seagate Technology ( STX ). 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. Western Digital’s year-over-year revenue has fallen for six straight quarters. That’s largely due to lower disk drive sales in the slumping PC market and the migration of disk storage to chip-based storage in many products. Seagate’s revenue has fallen for five straight quarters. “Now that SanDisk is subsumed into Western Digital’s operations, Western Digital now morphs from an enterprise highly exposed to the cannibalization of next-generation storage into a media agnostic, vertically integrated data storage provider capable of generating mid-single-digit revenue growth and low-double-digit EPS growth,” Ackerman wrote. He said the top 10 customers shared between Western Digital and SanDisk include Best Buy ( BBY ), Apple ( AAPL ), Hewlett Packard Enterprise ( HPE ) and HP Inc. ( HPQ ) “With SandDisk, Western Digital can now more effectively service both enterprise and hyper-scale customers and capitalize on the explosion of data creation that should double every two to three years by 2020,” Ackerman wrote.

AbbVie’s Newly Licensed Drug Scores Against Crohn’s Disease

Big Pharma AbbVie ( ABBV ) said Tuesday that a recently licensed drug candidate succeeded in a phase-two trial of Crohn’s disease, as the company seeks to refresh its blockbuster immunology franchise. In the late morning at the Digestive Disease Week conference in San Diego, AbbVie’s researchers presented results from an ongoing phase-two study of risankizumab, a drug AbbVie licensed from Boehringer Ingelheim during the first quarter, in Crohn’s disease. They said that after 12 weeks of treatment, 24% to 37% of patients were in remission — depending on the dose — compared with just 15% in the placebo group. The treated group also had fewer adverse events than the placebo group. Risankizumab is one of a newer group of drugs targeting interleukins, small proteins in cells associated with inflammation, among the proteins is TNF, or tumor necrosis factor. “These results are particularly encouraging because of the difficult-to-treat population within the study,” researcher Brian Feagan said in a statement. “Our patients had endoscopically confirmed moderate or more severe disease activity at study entry and the majority had previously failed treatment with one or more TNF antagonists.” The most popular TNF blocker happens to be Humira, AbbVie’s flagship drug treating Crohn’s disease as well as other immunological conditions like rheumatoid arthritis and psoriasis. Humira’s patents are under fire , however, and last week AbbVie’s stock tumbled when the patent board agreed to review a challenge to a methods patent brought by Coherus BioSciences ( CHRS ). Other drugs targeting interleukins include Novartis ‘ ( NVS ) Cosentyx, launched early last year for psoriasis, as well as Eli Lilly ‘s ( LLY ) Taltz, approved for psoriasis in March. Those drugs target interleukin (IL) 17, while risankizumab targets IL-23 through a novel mechanism of action. “The efficacy of this drug looks to be as good (as), or perhaps even better than IL-17,” Evercore ISI analyst John Scotti said in a video for clients recorded May 3. “And remember, Cosentyx peak sales in consensus right now are about $4 billion.” AbbVie stock was up 2.5% in afternoon trading on the stock market today , near 61, and shares in the past week have found support at the 50-day moving average line.

Tesla Short Seller Issues Scathing Warning Of Pending ‘Death Spiral’

Loading the player… Tesla Motors ( TSLA ) shares got slammed several weeks ago after analysts doubted the electric carmaker’s bullish production guidance. Now that the stock has tried to recover, bears want to take the driver’s seat again. Devonshire Research Group is shorting the stock and on Tuesday issued a report that says Tesla “has the potential to enter a death spiral” if it fails to deliver on its “bold claims on return and/or product value.” The investment firm also said Tesla “has engaged in aggressive accounting that calls to mind the experiences of Enron and WorldCom.” A Tesla spokeswoman directed IBD to the company’s latest shareholder letter, which explained that Tesla’s non-GAAP financial measures recognize revenue and related costs when customers take delivery of their cars. Other carmakers book revenue when vehicles are sold into dealership inventory rather than to end customers, it noted. BofA Sees 30% Downside And on Monday, Bank of America resumed coverage on Tesla with an underperform rating and 155 price target, which is about 30% lower than current prices. With the company’s recent equity offering, the analyst warned of further dilution to the stock, given Tesla’s cash burn rate. Tesla’s 2018 production goal was also called “optimistic at best.” Still, other Wall Street analysts have said the target is achievable and applauded Tesla for its leadership in autonomous driving technology. Global Equities Research said that suppliers are becoming more and more interested in working with Tesla, with the current supplier activity level at its Fremont, Calif., factory almost twice the level seen in December. Tesla Stock Hits Resistance Despite the negative reports, Tesla shares are holding up in the stock market today , rising 0.5%. But in Monday’s session, Tesla’s attempt to retake the key 200-day line failed as it hit resistance there. Shares are trading 24% below their high reached last July. Nvidia On Fire Meanwhile, Tesla chip supplier Nvidia ( NVDA ) is still on fire. Nvidia shares are hitting another new high Tuesday as they rise 2.2% and are extended 37% past a cup-with-handle buy point cleared in March. Mobileye Retakes 50-Day Tesla partner Mobileye ( MBLY ), which is working on autonomous driving capabilities, is trying to retake its 50-day moving average with a 1% gain. Mobileye stock is trading 42% below its all-time high reached last August. Alphabet Retakes 200-Day And Google owner Alphabet ( GOOGL ), which is also developing a self-driving car, is retaking its 200-day line as it climbs 2.2% in above-average volume. It’s still trading below its 50-day line, but a flat base with a 791.05 buy point has now taken shape.