What happened

Shares of Western Digital (NASDAQ:WDC) sank 53.5% in 2018, according to data from S&P Global Market Intelligence. That dismal performance gave the data storage company the dubious honor of having the worst-performing stock on the Nasdaq 100 index

^SPX Chart

^SPX data by YCharts.

Western Digital's stock got crushed as evidence mounted that pricing for NAND memory was falling, and shares continued to lose ground amid steep sell-offs in the broader market.

A fingerprint surrounded by ones and zeros.

Image source: Getty Images.

So what

Western Digital's 2016 move to purchase SanDisk made it a leader in the solid-state-drive (SSD) market that was powering much of the growth in the consumer data-storage hardware market. The acquisition elevated it over rival Seagate Technology in this new, more efficient product category but also exposed its business to another highly cyclical market.

NAND chip supplies have now built up,  prices are falling, and the company's hard-disk-drive business (HDD) business is in decline. The company's most recent earnings report showed its HDD shipments falling 19% compared to the prior-year period and dragging the company's total exabytes sold down 3% sequentially. With its core product categories facing pressure and not much immediate relief in sight, investors sold out of Western Digital in 2018.

Now what

As my colleague Leo Sun has pointed out, Western Digital generated roughly half of its sales from flash products last quarter and will likely see its business continue to be pressured as NAND prices decline this year. Western Digital stock trades at less than 5.5 times this year's expected earnings and roughly 0.6 times expected sales -- and it packs a roughly 5.3% dividend yield. However, the company's business has historically been cyclical, and pricing for flash memory chips suggests that sales and earnings could be heading through a substantial down cycle -- making it difficult to value the company using sales and earnings multiples.

Check out the latest Western Digital earnings call transcript.