Bullish options flow was detected in WDC stock on February 3, 2020.

Western Digital Corp. (NASDAQ: WDC) that it has entered into a definitive agreement to sell its ActiveScale company to Quantum Corp. (NASDAQ: QMCO), an industry leader in managing and storing video content and unstructured information. Under the arrangement, Quantum will acquire the full line of products that are ActiveScale from Western Digital. The statement follows Western Digital’s declared strategic intent to exit Storage Systems and optimize its Data Center Systems business around Storage Platforms. Western Digital completed the sale of its IntelliFlash product lines to DDN year.

“With their complementary portfolio of software defined solutions and technologies, and established customer base, Quantum is well positioned to build on the ActiveScale systems business,“ said Phil Bullinger, senior vice president & general manager of the Data Center business. “Both Western Digital and Quantum are committed to executing a smooth transition for all stakeholders and ensuring that customers will continue to receive best-in-class service and support.”

Argus analyst Jim Kelleher increased his price target on Western Digital to $82 and retained his Buy rating after its Q2 earnings beat and above-consensus estimate for Q3. He expects the swing to positive yearly comparisons to start from the quarter. Kelleher adds that while he’s not making any assumptions regarding the impact of the coronavirus, which may have adverse consequences for the company’s end markets, prior outbreaks had been contained without long-term harm to global markets.

On January 31, 2020, RBC Capital analyst Mitch Steves increased his price target on Western Digital to $85 and retained his Outperform rating after its Q2 earnings beat and above-consensus guidance for Q3. He cites the corporation’s view of an enhanced business environment and expectations of enterprise SSD revenue with added upside.

Also on January 31, 2020, Deutsche Bank analyst Sidney Ho raised his price target for Western Digital to $85 from $80 saying the company reported strong results and is now expecting an acceleration in flash gross margins in the first half of 2020. The analyst considers strong demand and flash pricing as providing upside potential for Western Digital through 2020. He retains a Buy rating on the shares.

On January 30, 2020, Western Digital reported Q2 adjusted EPS of 62c versus the consensus estimate of 58c. The company reported Q2 revenue of $4.2B versus the consensus estimate of $4.22B.

“The December quarter results reflect strong execution in our product roadmap, success in increasing our hard drive gross margin, and an improving flash market,” said Steve Milligan, chief executive officer, Western Digital. “We expect an accelerated recovery in our flash gross margins, which coupled with ongoing strength in demand for both hard drives and flash, positions us well for continued profitable growth in calendar year 2020.”

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