Given the current state of the WD/Toshiba relationship, and absent any resolution on long term supply out of Fab 6 and beyond, my near term downside target is $60. More downgrades are on their way, highlighting supply concerns, and the stock will be derisked.
No, I would not short this stock due to news risk. I am sidelined and waiting for reentry, if and when there is clarity on long term supply continuity. I have been selling all week, and sold the remainder of my shares at today's market open.
While one could consider shorting this stock in concert with the purchase of a protective call to limit risk, I am personally not comfortable playing the downside.
This post from another board provides a good example of who is buying the stock under current conditions:
"Added WDC to long term account as it hovers about 200MA support. Pays decent dividend and think Toshiba dispute resolves favorably" These are purely technical traders, essentially rolling the dice that fundamentals will change in their favor. While 200 day MVA is a great trading tool for a fundamentally sound stock, it is fool's folly for those who are oblivious to the deteriorating fundamentals and subsequent risk.
The support for the stock will disintegrate as these traders run out of ammunition, however this is exactly the support that provides opportunity for early exit.
While it isn't definitive, I would say that the fact that Bain, Hynix, Apple, Dell, and STX are participating in the Toshiba deal and WDC not only isn't a participant but, even more disturbing, Toshiba is trying ice them out of future fab deals is at least strongly suggestive that Milligan did not handle this situation very well.
That's like saying someone didn't handle an interview well because they didn't get the job. You can not infer actions from a result., Toshiba has an agenda, and I continue to see this as stemming from a cultural clash in which Milligan is not at fault. I have written extensively about this.
I said it wasn't definitive but it is "strongly suggestive". Both you and I believed at the start of this thing that the KKR-WDC partnership would be successful in these negotiations. We believed that they had the inside track and said so numerous times until the last few months. Someone screwed up. The most obvious candidate for that "someone" is Milligan or whoever decided on WDC's strategy for dealing with Toshiba. Ultimately, though, whoever conjured up the strategy, Milligan had to approve it and he has to bear responsibility for it. This isn't just any "result", it could end up being a company defining result if he can't make things right with Toshiba and continue to source NAND from the partnership.