Western Digital, the manufacturer of disk drives and flash memory, has received notable analyst upgrades that have contributed to an increase in its stock value.
Both Deutsche Bank and Barclays analysts believe that Western Digital will benefit from improved memory pricing and foresee value being unlocked through the pending spin-off of the company’s flash business.
Deutsche Bank analyst Sidney Ho has upgraded his rating on Western Digital shares from Hold to Buy. He has set a price target of $65, indicating a potential upside of approximately 30% from last week’s closing price. As of Tuesday, the stock was up 2.2% to $51.12.
Ho highlights that NAND flash-memory pricing has exceeded expectations, suggesting that the company’s December quarter results may be at the high end of its guidance range. For the quarter, Western Digital has forecasted a revenue range of $2.85 billion to $3.05 billion, with an adjusted loss per share of $1.05 to $1.35. The company is scheduled to report its results for the fiscal second quarter ending December on January 25.
Ho is optimistic about the planned spin-off of the flash memory business, expecting it to be completed in the second half of 2024 without any additional regulatory approval required. He believes that once the separation is official, any “conglomerate discount” should disappear, and his analysis suggests a share valuation range of $60 to $80.
While upgrading Western Digital, Ho has maintained his Hold rating on Seagate Technology, Western Digital’s primary rival in the disk drive market. However, he has increased his target price for Seagate to $72 from $60. Ho cautions that Seagate’s stock is trading well above its five-year medium multiple of forward earnings, indicating that its valuation may be considered “full.”
Barclays analyst Tom O’Malley has also upgraded Western Digital shares from Equal Weight to Overweight. He has raised his price target to $65 from $45. O’Malley emphasizes that the company has recently revised its hard-disk-drive forecast for 2024 and suggests that flash-memory pricing has bottomed out.