What: Shares of Western Digital (NASDAQ:WDC) fell as much as 11.9% on Friday, following the release of results for the fourth quarter of 2016. The report itself was impressive, but Western Digital's forward guidance failed to inspire investors.
So what: In the fourth quarter, Western Digital saw sales rising 9.5% year over year to $3.5 billion. Adjusted earnings fell from $1.51 per share to $0.94 per share. Analysts would have settled for earnings of $0.71 per share on sales near $3.45 billion.
Midway through the quarter, Western Digital closed the $19 billion acquisition of solid-state storage specialist SanDisk. As separate companies, Western Digital and SanDisk amassed total sales of $4.4 billion in the year-ago quarter. Then again, Western Digital's revenue fell 20% year over year in the third quarter. The puzzle pieces do fit together.
Looking ahead, management aimed for first-quarter revenue of roughly $4.45 billion and non-GAAP earnings near $0.88 per share. The sales target sits above the average analyst estimate, but Wall Street was expecting a juicier bottom line.
Now what: Western Digital headed into this report with plenty of momentum, as share prices had gained 31% after April's third-quarter report. Share prices took a dive in late June, reacting to the Brexit drama. The stock rebounded quickly, but I managed to start a Western Digital position while it was on fire sale.
That investment is still up by 10%, even after Friday's sharp plunge. Some analysts see this as profit-taking; I would call it another buy-in window. Western Digital has armed itself for the next era of storage technology, and the stock can be bought for a mere 9.3 times trailing earnings.
Anders Bylund owns shares of Western Digital. The Motley Fool also owns shares of Western Digital. Try any of our Foolish newsletter services free for 30 days.