On Friday, Mizuho maintained a Buy rating on Western Digital Corp. (NASDAQ:WDC) and increased the price target to $90 from $80. The firm's analyst cited the potential value from the company's NAND spinoff and favorable pricing trends as key drivers for the positive outlook.
The analyst expects Western Digital's revenue and earnings per share (EPS) for the June quarter to remain steady at $3.70 billion and $1.05 respectively, aligning with the previously estimated figures and slightly below the consensus of $3.74 billion and $1.15.
Despite this, the firm is optimistic about the company's future performance, raising its fiscal year 2025 estimates from $17.5 billion and $6.68 EPS to $18.0 billion and $7.87 EPS. The updated figures are a slight adjustment from the consensus estimates of $17.8 billion and $7.97 EPS.
Looking further ahead, the firm also increased its fiscal year 2026 revenue and EPS estimates from $18.4 billion and $6.70 to $19.1 billion and $7.46, which is comparatively close to the consensus of $18.6 billion and $7.56 EPS.
The analyst highlighted the strategic move involving Western Digital's NAND business, anticipating that the spinoff would unlock additional value for the company. Additionally, Western Digital is expected to benefit from a stronger cloud and enterprise environment, as well as increased NAND content driven by advancements in artificial intelligence on devices.
The new price target represents approximately 1.7 times the firm's estimated sales for fiscal year 2025 ending in June, which is noted to be at a discount compared to its peer Seagate Technology, trading at around 2.2 times sales. This valuation gap suggests that Western Digital's stock may have room to grow as it navigates through the evolving market conditions and executes its strategic initiatives.
InvestingPro Insights
Western Digital Corp. (NASDAQ:WDC) has been recognized as a prominent player in the Technology Hardware, Storage & Peripherals industry. Recent data from InvestingPro shows a notable market capitalization of $24.66 billion. However, the company faces challenges with a negative P/E ratio of -14.98, indicating that analysts are not expecting profitability in the near term. This aligns with the concerns over weak gross profit margins, as the latest figures show a margin of just 13.83%.
On the brighter side, Western Digital's stock has demonstrated strong performance with a significant return of 94.97% over the last year. This robust growth is also reflected in the short-term, with a price uptick of 26.97% over the last three months. The company's liquid assets have been sufficient to cover short-term obligations, which could provide some financial stability amidst the volatility of its stock price movements.
Investors looking for more insights on Western Digital can find additional InvestingPro Tips, which delve deeper into the company's financial health and stock performance. For instance, Western Digital is trading near its 52-week high, a potential indicator of market confidence. Moreover, for those interested in an in-depth analysis, using the promo code PRONEWS24 can secure an additional 10% off a yearly or biyearly Pro and Pro+ subscription, granting access to an extensive array of InvestingPro Tips, including those not mentioned here.
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