Perhaps the single biggest advantage to owning tech stocks is their ability to quickly exceed earnings expectations due to the speed at which consumer demand for superior products can accelerate. Case in point is Western Digital Corp. (Nasdaq: WDC), which earlier this year was roundly criticized for the price it paid to acquire SanDisk, a deal I summarized in the May issue of Breakthrough Tech Weekly.

In that article I stated, “How profitable the SanDisk acquisition becomes is presently unknowable as it depends on a variety of volatile factors, including global demand for PCs, the growth rate for devices using 3-D NAND memory, and the pace at which new applications for emerging technologies using all three types of memory grows. Regardless, it’s probably safe to say that this transaction won’t help earnings this fiscal year—even after cost savings from cutting redundant operations.”

Looks like I was wrong about that, but in a good way. Last week Western Digital revised its earnings forecast upward for the current quarter from 85 – 90 cents per share to $1 – 1.05 due in part to higher than expected revenue from its SanDisk acquisition: “Enabled by ongoing strong execution, the company now expects its first quarter revenue to be in the range of $4.45 billion to $4.55 billion compared to its earlier forecast of $4.4 billion to $4.5 billion. Non-GAAP gross margin is expected to be approximately 33%, versus the earlier forecast of 32%, due to the improved mix and pricing.”

As a result, Western Digital’s share price jumped more than 10% on the news, temporarily driving it above a key resistance level at $53. That also happens to be the break-even price for the LEAPS option recommendation that I made at the end of the same article, which we closed out in July for a 51% gain after WDC jumped on another strong earnings report. But if you bought WDC stock and still own it, then you probably should hang onto to it for a while to see just how much future earnings may improve as the company fully integrates SanDisk’s 3-D NAND memory chips into its product suite.

If you do not yet own Western Digital, then current stock market weakness due to concerns over a possible Fed rate hike next week that has pulled its share price back down near $51 this morning may afford a nice entry point. There’s no telling how much lower it, and the overall stock market, may drop later this week, but if WDC falls below $50 then you may want to add it to your portfolio. It already earns a perfect score for Dividend Yield and Relative Value from my IDEAL stock rating system, and I expect its score for Cash Flow will begin to escalate in the year to come based on the revised revenue guidance.