Goldman Sachs analyst Toshiya Hari downgraded Western Digital (WDC) to Sell from Neutral with a price target of $31, down from $43. The analyst heard from “multiple sources” that the NAND suppliers are offering below cash-cost prices in an attempt to work down inventories “in what remains a weak macroeconomic backdrop.” Given an expectation for a “severe” memory industry downturn, and historically low trough gross margins by extension, Hari downgraded Western Digital to Sell. He believes net leverage on the company’s balance sheet is likely to come “under greater scrutiny” by investors, and may constrain its operating activities in the near-term, presenting a risk to its post-cycle competitive position. However, Hari reiterates a Buy rating on Micron (MU) with a 12-month price target of $62 citing his expectation for “normalized” earnings, supported by favorable competitive dynamics in the DRAM industry.
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