On Wednesday, BofA Securities updated its view on Western Digital Corp. (NASDAQ: NASDAQ:WDC), raising the stock price target to $75 from the previous $70 while maintaining a Buy rating on the stock.
This adjustment follows Western Digital's positive pre-announcement last week, where the company reported revenue at the high end of its guidance, gross margin above expectations, and earnings per share (EPS) also surpassing the guided range.
The firm has updated its fiscal third-quarter revenue and EPS estimates for Western Digital to $3.4 billion and $0.26, up from $3.3 billion and $0.14, respectively. For the fiscal fourth quarter, estimates were also increased to $3.6 billion in revenue and $1.18 in EPS, from the earlier forecast of $3.4 billion in revenue and $1.14 in EPS.
BofA Securities reinforced their Buy rating, citing that Western Digital is nearing the bottom of the cycle and is on track to separate its HDD (hard disk drive) and NAND (flash memory) businesses in the second half of the calendar year 2024.
The management of Western Digital anticipates a sequential decline in flash bit shipments in the March quarter, followed by stabilization in the June quarter, with a recovery in flash revenues primarily driven by average selling price (ASP) improvements. Meanwhile, growth in the Cloud segment is expected to drive HDD exabytes and ASPs.
In leadership news, Western Digital announced this week that David Goeckeler, the current CEO, will take the helm of the Flash business following the split. Additionally, Irving Tan has been named as the CEO of the new standalone HDD company. BofA Securities notes Goeckeler's strong connections with the Japanese government and financial institutions as a positive factor for the future of the Flash business.
The revised stock price objective of $75 is based on a 9x multiple of the unchanged calendar year 2025 estimated EPS of $8.31, which is an increase from the prior estimate of $8.16.
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