Storage device suppliers are out of favor. Western Digital (NASDAQ:WDC) and Seagate (NASDAQ:STX) is sinking so fast that value investors should take notice. And now that Seagate has a bigger market cap than Western Digital, investors have two storage stocks to choose from.
Multiple analysts issued downgrades on WDC stock on June 5 -6, citing China uncertainty, ties to Huawei supply contracts, and a glut of memory inventory levels. While DRAM and NAND prices keep falling, the supply imbalance in the market will correct itself by later this year. The China slowdown and trade uncertainties is causing a temporary, artificial drop in demand for chips. A trade deal would immediately end the slowdown but few may predict when, or if, it happens.
WDC stock pays a dividend yielding over 5%. Seagate’s stock now has a dividend yielding 5.7%. Investors may not guess when the stock bottoms but may estimate when revenue declines will slow. By late this year or early next year, the excess supply will moderate. Enterprises and smartphone suppliers need more NAND storage. As that demand improves in the next year, both stocks will rebound.
