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Western Digital Downgraded on Fears Its NAND Memory Unit Will Ramp Up Debt

Hari also lowered his price target on Western Digital, to $31 from $43.

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Western Digital‘s balance sheet is one to watch as the supply-demand dynamics for the chip industry worsen, according to one
Goldman Sachs
analyst who downgraded the stock.

Toshiya Hari on Thursday lowered his rating on the data storage maker’s stock to Sell from Neutral. He also lowered his price target, to $31 from $43.

His reasoning primarily rests on the continuing downturn in NAND, a storage technology. Hari believes it will elevate
Western Digital
‘s (ticker: WDC) ratio of net debt to Ebitda (earnings before interest, taxes, depreciation, and amortization) over the coming quarters, thereby constraining operating activities and putting its competitive position at risk.

Suppliers including Micron have cut NAND chip production as demand dries up, partly because of rising interest rates threatening a recession. More recently, Goldman’s research found that multiple NAND suppliers are offering lower prices to work down their inventories and Hari expects a severe memory industry downturn ahead.

However, Western Digital CEO David Goeckeler said in a Dec. 9 conference with
that, for now, the company is “maintaining its brand premium as far as share as well” and the business’s performance is “much more predictable” than a couple of quarters ago. The company didn’t immediately respond to a request for comment on Goldman’s Sell rating on the stock.

Western Digital’s stock fell 7.5% to $33.18 after the markets opened on Thursday.

Write to Karishma Vanjani at


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