Lake Forest-based Western Digital Corp.’s shares slumped nearly 8.6% Tuesday
after an analyst raised concerns about the company’s ability to meet its profit forecast and higher-than-expected revenue projections in the current quarter.
Piper Jaffray & Co.’s Leslie P. Santiago cut his recommendation on Western Digital to “market perform” from “outperform.” Santiago said he did so because Western Digital’s shares are nearing his price target of $16.
“Although we still believe demand for Western Digital’s products more than justifies its current valuation and recent outperformance, we see hurdles to continued outperformance going forward,” Santago wrote in a research note.
The disk drive maker could face higher operating expenses as it attempts to keep pace with rival Seagate Technology, Santiago said.
Western Digital spokesman Steve Shattuck declined to comment on the report. He said the company stands by its profit and revenue guidance outlined in a Securities and Exchange Commission filing on Monday.
“That would be all of the information that we would be disclosing,” he said. “I don’t want to comment on an analyst’s report.”
On Monday, Western Digital boosted its forecast, fueled by what it said was strong demand for its hard disk drives used in personal video recorders, notebook and business personal computers.
In the filing, Western Digital said it expected fourth quarter revenue of $900 million to $915 million, up from its previous target of $875 million to $900 million, and earnings in line with previous forecasts.
The company’s quarter ends July 1. Analysts surveyed by Thomson Financial expect the company to earn $51 million for the quarter.
