Sunday, March 6, 2011

Western Digital Corporation (NYSE: WDC) Q2 2011 Price Target

Recent price: 30.01$
P/E Ratio: 6.32
3 Months Target Price: 35$

Company Description
According do Reuters, Western Digital Corporation (WD) designs, develops, manufactures and sells hard drives. The Company sells its products worldwide to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for use in computer systems, subsystems or consumer electronics (CE) devices, and to distributors, resellers and retailers. Its hard drives are used in desktop computers, notebook computers, and enterprise applications such as servers, workstations, network attached storage, storage area networks and video surveillance equipment. Additionally, its hard drives are used in CE applications, such as digital video recorders (DVRs), and satellite and cable set-top boxes (STBs). It also sells its hard drives as stand-alone storage products by integrating them into finished enclosures, embedding application software and offering the products as WD-branded external storage appliances for personal data backup and portable or expanded storage of digital music, photographs, video and other digital data.

Confidence Margins
Strong resistance $36.79 (+23%)
Light resistance $35.07 (+17%)
Light support $27.41 (-9%)
Strong support $23.06 (-23%)

This hard drive storage manufacturer has been subject to many rumors regarding an IPO or an acquisition. As time has passed however, investors have let the company down and there is still quite some potential left in the company.

Entry strategy
For the cautious investor:
Buy the stock for 31$ or less.

For the risk-taking trader:
The July 2011 30$ call option contract seems to be the right position to take, they can be acquired for about 290$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 35$, or keep it until 36$ if you are more bullish in your own analysis. It is highly recommended to keep the position on check if it goes sour.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 35$. This should provide a good return if the underlying reaches the target price as the contracts will get deeper in the money.

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