WDC released earnings on May 8. Like Fred Sanford said to Aunt Ester, it was ugly!
If you look at the trend in their quarterly sales, sales are trending down. It hasn't been this low since the 3rd quarter of 2012. Their gross margin is also trending down. It is the lowest it has been since the 3rd period of 2009. Finally, their operating profit is deeply in the red. I track WDC back to 2004 and it has never been that low as far as I've tracked.
They have had a number of challenges in past that caused them significant problems. First and foremost, they are in a highly cyclical business. They bought SanDisk in 2016 and leveraged up - big time. Too much leverage in cyclincal industries is often the kiss of death. WDC then had a very long saga with Toshiba over a joint venture in 2017 which cost them dearly.
So today, WDC is announcing a merger agreement with Kioxia. Given their terrible skills with mergers, acquisitions, and joint ventures, why is their stock moving up? It's got to be plainly and simply - gambling! The stock should be driving into oblivion.
I swear few people in the market (notice I didn't call them investors!) ever read or review a 10K or 10Q. It is good that these folks don't drive at night because they probably wouldn't even turn on their lights to see what they are doing!
Don’t forget to say goodbye to Aunt Ester now!
Be smart, be well-read, be aware and be successful.
"The individual investor should act consistently as an investor and not as a speculator."
- Ben Graham
