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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.

Apple Chip Suppliers Broadcom, NXP, Skyworks Up On iPhone 7 Hopes

Apple ( AAPL ) chip suppliers Skyworks Solutions ( SWKS ), Cirrus Logic ( CRUS ) and Qorvo ( QRVO ) stocks lifted Monday on a bullish RBC Capital report that sees fellow chipmaker Broadcom ( AVGO ) reaching $16 earnings per share on merger synergies and iPhone 7 content gains. But Broadcom’s Q2 wireless sales will likely dip $40 million to $50 million on slowing current-generation iPhone sales, RBC Capital analyst Amit Daryanani wrote in the research report. He rates Broadcom stock his top semiconductor pick, with a 180 price target. Over the next two years, Broadcom stock could reach 200, Daryanani says. In afternoon trading on the stock market today , Broadcom stock was up a fraction, trailing shares of InvenSense ( INVN ) and Qorvo, which jumped 3.4% and 3.3%, respectively. Cirrus Logic, Skyworks and Taiwan Semiconductor Manufacturing ( TSM ) stocks were up 3, 2.5% and 1.5%, respectively. NXP Semiconductors ( NXPI ) stock was up nearly 1.5%, while  Integrated Device Technology ( IDTI ) was up a fraction. Broadcom is slated to report its Q2 earnings after the close June 2. Daryanani expects Broadcom to miss consensus expectations for $3.55 billion in sales on petering Apple iPhone sales, despite stronger-than-expected Samsung Galaxy S7 sales. Apple comprises 15% of Broadcom’s sales, Daryanani estimates, with Samsung in the high single digits. Apple’s June-quarter guidance implies 40 million iPhones shipped vs. consensus views for 44 million. Near term, Apple will pose a headwind until the iPhone 7 , expected to be released in September, ramps up. “To that end, Broadcom’s FBAR (film bulk acoustic resonator) business could see double-digit year-over-year growth driven by content gains,” Daryanani wrote. Wi-Fi combo chips could also see modest average sales prices tailwinds. Earlier, Broadcom saw wireless account for 23% of sales. Daryanani expects that segment to grow 37% quarter over quarter as the company’s recent merger is factored. The former Avago Technologies bought Broadcom for $37 million in February, but kept the Broadcom name. Storage sales will likely become “incrementally worse,” Daryanani wrote. Western Digital ( WDC ) and Seagate Technologies ‘ ( STX ) recent earnings suggest a $100 million hard-disk drive total addressable market in March and a $95 million TAM in June, down 20% and 15% vs. last year. Enterprise storage is expected to account for 17% of Broadcom’s Q2 sales. Daryanani sees the segment declining 14% vs. Q1, vs. 6% sequential growth in the prior quarter.

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.