Key insights
- BofA raised its price target on Western Digital to $415 from $375, citing expectations for strong Q3 2026 revenue, margins, and EPS. They anticipate gross margins expanding significantly and revenue growth driven by heat-assisted magnetic recording technology. The increased price target is based on a higher multiple of calendar year 2027 estimated EPS. While BofA is bullish, InvestingPro analysis suggests the stock may be overvalued.
Investing.com - BofA Securities raised its price target on Western Digital Corp. (NASDAQ:WDC) to $415 from $375 while maintaining a Buy rating. The stock currently trades at $361.69, near its 52-week high of $368.40, following a remarkable 895% surge over the past year.
The firm expects the company’s third-quarter fiscal 2026 revenue, margins and earnings per share to exceed the high end of guidance when Western Digital reports results after market close on Thursday, April 30. BofA Securities models gross margin expanding 280 basis points quarter-over-quarter to 48.9%, compared to the guidance midpoint of 47.5%. The company’s gross profit margin stood at 43% over the last twelve months, with Western Digital posting strong profitability and revenue growth of 28%.
The firm sees incremental gross margins above 70% and expects gross margin to increase each quarter in calendar year 2026. Western Digital has heat-assisted magnetic recording qualification ongoing with two cloud service providers, with ramp expected to start in the first half of calendar year 2027.
BofA Securities raised its fiscal 2026 revenue estimate to $12.7 billion from $12.4 billion and earnings per share estimate to $9.40 from $9.03. The firm increased its price target based on 25 times calendar year 2027 estimated earnings per share of $16.89, up from a prior multiple of 24 times on estimated earnings per share of $15.53. Western Digital currently trades at a P/E ratio of 33.8, though an InvestingPro Tip highlights the stock is trading at a low P/E relative to near-term earnings growth, with a PEG ratio of just 0.17. Despite the bullish analyst outlook, InvestingPro analysis suggests the stock may be overvalued based on its Fair Value assessment. Investors can explore more valuation insights on the Most Overvalued stocks list, and access 15 additional ProTips plus comprehensive analysis in Western Digital’s Pro Research Report, available exclusively to InvestingPro subscribers.
The firm cited secular growth in the hard disk drive market, favorable supply and demand balance, and strong enterprise and nearline growth driven by improved mix as reasons for maintaining its Buy rating.
In other recent news, Western Digital Corp. has been actively managing its financial obligations, completing the full redemption of its 4.750% senior notes due 2026. This move follows Western Digital’s exchange of 5.8 million Sandisk shares to reduce debt, which S&P Global Ratings cited in upgrading the company’s rating to ’BBB-’. The rating agency noted Western Digital’s debt reduction and expected net cash position, maintaining a stable outlook. Additionally, Western Digital plans to sell up to 7.5 million shares of Sandisk, as indicated in a regulatory filing, with Sandisk not receiving any proceeds from this sale.
Meanwhile, Bernstein SocGen Group upgraded Western Digital’s stock rating to Outperform, highlighting the recent selloff in hard disk drive and memory stocks as an opportunity. In related news, Morgan Stanley increased its price target for Seagate Technology shares to $582, maintaining an Overweight rating. The firm observed a strengthening demand for hard disk drives, with potential shortages anticipated through 2028. These developments reflect significant activities in the technology sector, impacting both Western Digital and Seagate Technology.
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