Shares of Lake Forest’s Western Digital Corp., a maker of disk drives for computers and consumer electronics, slumped Thursday after an analyst downgraded the stock.
Investors sent shares down 4% at the close of trading on a recent market value of about $8 billion.
Stifel Nicolaus & Co. analyst Aaron Rakers cut his rating on the stock to “hold” from “buy” and removed it from Stifel’s list of best-performing stocks.
He downgraded the stock based on concerns about investor sentiment surrounding Western Digital’s upcoming earnings report for the September quarter.
“While hard disk drive fundamentals look to remain positive into the December quarter, we believe investor sentiment could begin to factor in,” Rakers said in a research note.
Rakers also cited Western Digital’s highflying stock price as one reason why its upside prospects might slow.
“With the stock currently trading above our prior target price of $37, we are downgrading shares,” he said.
Western Digital was trading around $36 per share on Thursday. It closed at nearly $38 per share Wednesday. That’s up more than 200% since the start of the year on a market value of $8 billion.
But Rakers’ positive stance on the company remains unchanged.
“To be very clear, this is not a negative call on Western Digital’s fundamental story as we continue to applaud the company’s execution,” he said. “Rather, this is a call on our belief that investor sentiment could be poised to take a pause on what we believe is a very understood upside story. We continue to believe that Western Digital’s management has done and will continue to do a superior job.”
Western Digital is set to post results for the three months through September next week.
Analysts, on average, are expecting the company to post profits of $202 million on sales of $2.04 billion.
