How 'bout that stock market?

[sahtt]

Revenue projections look great!

Western Digital Beats Analyst Estimates Silly

By Seth Jayson | More Articles
April 27, 2012 | Comments (1)

Western Digital (NYSE: WDC ) reported earnings on April 26. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 30 (Q3), Western Digital crushed expectations on revenues and crushed expectations on earnings per share.

Compared to the prior-year quarter, revenue expanded significantly and GAAP earnings per share increased significantly.

Margins expanded across the board.

Revenue details
Western Digital tallied revenue of $3.04 billion. The 16 analysts polled by S&P Capital IQ anticipated revenue of $2.42 billion on the same basis. GAAP reported sales were 35% higher than the prior-year quarter's $2.25 billion.

EPS details
EPS came in at $2.52. The 19 earnings estimates compiled by S&P Capital IQ predicted $1.55 per share. GAAP EPS of $1.96 for Q3 were 216% higher than the prior-year quarter's $0.62 per share.

Margin details
For the quarter, gross margin was 32.2%, 1,400 basis points better than the prior-year quarter. Operating margin was 18.4%, 1,090 basis points better than the prior-year quarter. Net margin was 15.9%, 940 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $4.41 billion. On the bottom line, the average EPS estimate is $2.48.

Next year's average estimate for revenue is $11.70 billion. The average EPS estimate is $6.90.

Source:
http://www.fool.com/investing/general/2012/04/27/western-digital-beats-analyst-estimates-silly.aspx

Hey rob,

I know investing can be frustrating and I feel for you. What a stock does after earnings is unpredictable.

Either you are trading, in which there is no reason to hold a stock through earnings, or you are investing, and if the company is still doing "well," a poor response to great earnings is an opportunity, not something to beat yourself up about.

Reactions to earnings are entirely human. They do not have to be logical and often aren't. But over a long period of time, if a company makes a lot of money and keeps debt low/manageable, it will benefit shareholders.

Remember that AAPL went from 200+ to $75 during the financial crisis and it decimated earnings every single time throughout that time period. The fact it was getting beaten down was a blessing, not a curse.

On the other hand, a stock that is trading very poorly for a significant length of time usually has something else going. It could be a red flag that you are missing in your analysis.

 

[sahtt]

Rob,

Let's look at a couple plain jane charts of WDC:
5yr

6m

Many people over rely on charts, aka the "technicals," while others ignore their true value. Charts alone are NOT sufficient to pick a stock, but ignoring charts for entry/exit points is just as foolish. I'd go so far as to say that is a fact more than an opinion. Charts tell us how humans behaved in the past, nothing more, nothing less. I won't chastise those obsessed with moving averages etc. but I put pretty close to 0 emphasis on them, and I do put 0 emphasis on them for investing (multi year positions).

The 5yr chart is tells us several things. First, during another global equities collapse (which is always on the table), there is a high probability of $10-15 a share. Second, there is also a high probability a substantial buyer at $25/share used to exist and still may exist. A lot of times you'll see a huge block on the LVL2 window at $25 for a stock with this chart. Things change in a the course of a 5yr chart but some things remain the same. Lastly, it is extremely clear that something incredible is going to happen in order to get this thing out of the 45 range. If you made me hold this for more than a month, I wouldn't buy this stock at $44 if you paid 10% of the cost.

I would even go so far as to say the same "entity" buying up to $25-$27 is probably letting some go as the stock nears $45. That is speculation but educated speculation if such a thing exists.

Now let's jump to the 6m chart.
Wow - $26 to $44 in 6 months! If you were riding that train you would be shaking with anxiety trying to get the hell off. Odds are that unless the market makes significant new highs, you'll have another chance to buy this stock in the low 30's; a big percentage move from the mid 40's. This stock hasn't broke the mid 40's over the entire time it has existed! If I had just made a 50-80% profit in the last two quarters, there is no way in hell I'd be long going into earnings when the stock was at 44.

Another thing about WDC is it doesn't look to pay a dividend. People tend to underestimate the degree that affects how a stock trades. If you are a big money manager and are not getting paid a dividend, it is reckless not to be constantly scaling in and out of the position. After a 80% move, the risk (99.x% of the equation) vs the reward (tiny chance it makes all time highs, and no reward of receiving even a paltry dividend while waiting) is overwhelming.

 

[robr]

Thanks much, I appreciate you taking the time to do that. You guys just demonstrate I have no business messing around with this stuff because I simply don't understand enough to know what I'm doing. Sounds like I'm selling WDC on Monday, lose a few hundred bucks. A cheap lesson. I've read a number of books, mostly Motley Fool stuff, but a lot of emphasis has been placed on researching the company, which I suppose if you're long on something, that makes a lot of sense, but in the short term is irrelevant. The way you walked thru it makes complete sense.

 

[sahtt]

Thanks much, I appreciate you taking the time to do that. You guys just demonstrate I have no business messing around with this stuff because I simply don't understand enough to know what I'm doing. Sounds like I'm selling WDC on Monday, lose a few hundred bucks. A cheap lesson. I've read a number of books, mostly Motley Fool stuff, but a lot of emphasis has been placed on researching the company, which I suppose if you're long on something, that makes a lot of sense, but in the short term is irrelevant. The way you walked thru it makes complete sense.

Your attitude and humility is going to take you a long way rob (probably already has, just maybe not in investing yet :smile.

John Mauldin's "bulls eye investing" is a good read for newbies. Costs maybe $10 used on Amazon. I'd send mine to you for free but my younger brother tends to "collect" all my investing books..

If I could make a broader suggestion - focus picking companies that pay dividends, even if it is XOM and it only pays 2.x%. Dividends are half of the market's historical returns and make investing easier, simpler, more reliable, and more profitable. As long as interest rates are low, you cannot lose buying solid dividend paying companies at good prices. Determining what is "solid" and "good" is obviously the key :smile:. After you find 10-20 you think are good, pick one or two from each sector (no, I am not giving you permission to buy 15 high yielding energy stocks) and put some bids out there at good prices. Right now that is likely well under where the stock is currently trading. Some muni bonds aren't a bad idea either but that requires an entire set of investing knowledge outside of equities (15% of my portfolio is in muni bonds). Preferreds are good too like WFC-J.

Think about it - if you buy a stock yielding 4-5% and reinvest the dividends, you are going to match the long term gains of the market as long as your companies don't go bankrupt or cut their dividends substantially. Of course capital gains are nice and you still have to scale in and out, but it makes life much easier (I sold about half my KMP which kills me because of the yield but I had to since it has run up so much IMO).

As a professional trader: Fancy debt securities and high flying stocks.
As an investor: Yield, a couple long term themes like AAPL, and more yield diversified across multiple sectors, levels of debt, and equity share classes.

Don't give up my friend, the markets are as rewarding as they are challenging to deal with.

 

[Venom2049]

Im looking to invest some money on the stoc market but im not very familiar with it. Is there any book or site you guys recommend to start looking at before any investment decision. which company do you guys recommend to do Trading? Any thoughts about Facebook stocks?
Thanks for your help, Nico.

 

[MrHugo]

I am looking to put money into the stock market. Three years ago, I thought the market is too high, now it is even higher!! What do you guys think? how is the timing now. I am sure if I leave money in the market for 20 years, it will go up eventually.

Mostly looking at spreading 100k for CAT, MSFT, VZN, ATT, APPL, AMZN, FB, DIS, HD, INTC. I know this is nsxprime, but i know people on here are quite financially savvy.

 

[lazyboyz69]

I would look into bank stocks like JPM, BAC, C. When interest rates rise, banks tend to do well.

 

[B2FiNiTY]

Hugo, if you ever wanna talk stocks hit me up on FB.

In any case, I recommend GOOS, DNP, AWF, NFLX, AMZN, GOOG etc

 

[docjohn]

what are your goals/expectations with the money you invest and what is your time horizon as to when you would spend it.

 

[MrHugo]

What stocks to buy if 20 years? would 10 years be about the same too?

I hope google don't get out of business in twenty years, but you never know?

 

[docjohn]

look at salesforce and paypal....FB ....BA...C.....amazon....baba......mdso......so many stocks....

 

[docjohn]

about that tesla..........did'nt see that coming...but his tweets of late have shown frustrations with being public

 

[docjohn]

today's action deserves a bump.....trump bottom :wink:

 

[alum04org]

Ummmm....

today's action deserves a bump.....trump bottom :wink:

Sure was hoping so, but today 12-27-18 at 235 pm Dow down ~550 at 22,327. Giddyup now market!


405 pm at 23,138 up 260...... :biggrin: