During today's afternoon trading session, Western Digital plummeted to $126.1 per share. It's still 21.73% above its mean target price of $103.59, so there may still be room for more downwards movement -- even after today's -4.0% drop. Analysts are giving the Electronics & Computer Distribution stock on average rating of buy, with target prices ranging from 62.0 to 171.0 dollars per share.
For the greater market's outlook on the stock, we can use Western Digital's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 12.8% which means the outlook is split.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
Another way to gauge the sentiment on Western Digital is to look at the percentage of institutions that are invested in the stock. In this case, 106.8% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
To sum up, Western Digital is probably the subject of negative market sentiment because of an analyst belief that shares are overpriced, a buy rating, an above average percentage of its shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about WDC:
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The stock has trailing 12 month earnings per share (EPS) of $4.45
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Western Digital has a trailing 12 month Price to Earnings (P/E) ratio of 28.3 compared to the S&P 500 average of 29.3
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The company has a Price to Book (P/B) ratio of 8.19 in contrast to the S&P 500's average ratio of 4.74
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Western Digital is a Technology company, and the sector average P/E and P/B ratios are 30.44 and 4.19 respectively
