Western Digital Corp (NASDAQ: WDC) – Argus Research Recommends BUY Call with $66 Target

Argus Research has issued a BUY rating for Western Digital Corporation (WDC), setting a 12-month target price of $88. WDC’s strategic positioning in the data storage sector, including its cloud, enterprise, and HDD segments, has shown promising growth. Key financials indicate positive momentum, driven by a 49% year-over-year increase in revenue and strengthened HDD demand. Additionally, WDC’s anticipated split into two entities—HDD and NAND flash—promises focused growth and greater market adaptability. This report outlines critical aspects of WDC’s recent performance, market positioning, and future outlook for potential investors.

Key Financial Highlights

Revenue Surge: Western Digital reported $4.1 billion in revenue for fiscal 1Q25, a 49% increase year-over-year.
Improved Profitability: Achieved a non-GAAP EPS of $1.78, outperforming forecasts, marking three consecutive profitable quarters.
Target Price: Argus reiterates a BUY rating with a 12-month target of $88, citing robust top- and bottom-line growth.

Strategic Business Developments

Business Split: WDC plans to divide into two independent companies focusing on HDD and NAND flash. This move, slated for completion by 2025, aims to streamline operations and sharpen each unit’s market approach.
AI-Driven Demand: Growth in AI applications has spurred demand in the cloud storage sector, benefiting WDC’s product lineup, including SSDs and high-capacity HDDs.
Market Trends: Recovery in enterprise and consumer segments, particularly in mass-capacity HDD, is boosting revenues, with cloud market demand increasing over 150% annually.

Investment Thesis

WDC is positioned favorably due to its diversified presence in the data storage industry. The company’s continuous profitability and growth in key areas support a positive outlook. Increased AI-driven data needs and advancements in flash storage, alongside WDC’s product roadmap, suggest sustained growth potential.

Future Growth Prospects

AI Data Cycle Impact: The surge in AI applications is projected to increase data storage requirements, benefiting both HDD and SSD sectors.
Separation Benefits: By splitting its HDD and NAND flash businesses, WDC is expected to enhance operational focus and improve strategic agility within each segment.
Projected Revenue Growth: WDC’s fiscal 2Q25 guidance points to a further increase, with expected revenue of $4.2-$4.4 billion, up 42% annually.

Risks and Considerations

Market Volatility: As a memory-sensitive stock, WDC’s performance may fluctuate based on market dynamics and sector-specific demand changes.
Execution of Split: The successful division into HDD and NAND flash units poses risks, including potential cost increases due to overlapping resources.

Investor Takeaway

Argus’s recommendation to BUY WDC stock, with a target price of $88, reflects confidence in WDC’s growth trajectory, bolstered by market trends and strategic initiatives. Investors, particularly those open to the tech sector’s inherent volatility, may find value in WDC’s forecasted growth and strategic realignment.

Disclaimer: Investors should conduct independent research and consider personal financial goals and risk tolerance before making investment decisions.

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