What Happened:

Shares of leading data storage manufacturer Western Digital (NASDAQ: WDC) fell 5.53% in the morning session after the company reported third-quarter earnings results that surpassed analysts' revenue and earnings per share estimates. However, the performance was not all positive, as free cash flow missed, gross margin deteriorated, and inventory levels rose. Revenue guidance for the next quarter also came in below analysts' estimates. It was a mixed quarter for the company, with the results highlighting similar challenges that some semiconductor companies have encountered this earnings season.

What is the market telling us:

Western Digital's shares are somewhat volatile and over the last year have had 23 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was about 1 month ago, when the company gained 5.14% on the news that competitor, Micron, reported earnings for the latest quarter. While the results trailed the consensus estimates for revenue and operating profits, Wall Street analysts noted that the semiconductor company had faced a steeper slump than anticipated, but signs of a rebound are emerging. The outlook from the company was optimistic, with Sanjay Mehrotra, the chief executive, affirming his "confidence" in the long-term demand scenario and envisaging "gradual improvements" in the industry's supply-demand equation. The stock reaction suggests that the market is putting more weight on longer-term risk/reward than near-term cyclical results.

Western Digital is up 5.35% since the beginning of the year, but at $33.08 per share it is still trading 46.9% below its 52-week high of $62.25 from May 2022. Investors who bought $1,000 worth of Western Digital's shares 5 years ago would now be looking at an investment worth $421.80.

Is now the time to buy Western Digital? Access our full analysis of the earnings results here, it's free.