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Wednesday, February 27, 2008

Western Digital (WDC) guides above consensus

In their 10Q filing, Western Digital guides revenues to 2.00 – 2.08 billion with EPS of $1.05 - $1.11. When they reported just a few weeks ago, they had guided to 1.925 – 2.00 bil and $0.85 - $0.91. There's a lot of leverage in their model clearly as small changes to the top line affect EPS significantly. I've been looking for a reason to say the stock should be sold as it's up 25% from when I suggested buying it after their last quarterly report.

The chart says it's a sale under 32.5, where it will have violated the trendline it recently broke above and an outright sale at $37 if it gets there in the next couple of days. There's nothing wrong with selling ½ here and leaving the rest on. It's still cheap but the environment is worse than it was a month ago.

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