On Tuesday, TD Cowen reaffirmed its confidence in Western Digital Corp. (NASDAQ:WDC) shares, maintaining a Buy rating and a price target of $80.00. The endorsement follows the recent release of Western Digital's Form 10, which detailed the upcoming spin-off of its Flash business. The new entity will operate under the ticker "SNDK," and Western Digital shareholders are set to receive one-third of the shares in the newly formed "Spinco."
Western Digital's strategic move to separate its Flash division allows for a focused assessment of the company's Hard Disk Drive (HDD) segment in comparison to its nearest competitor, Seagate Technology (NASDAQ:STX). The disclosed metrics from the Form 10 report have been interpreted by TD Cowen as a positive sign for Western Digital's HDD business.
The analyst from TD Cowen conveyed optimism about the spin-off, highlighting the potential benefits for Western Digital's HDD segment. The report suggests that the separation could provide clearer visibility into the company's operations and enhance shareholder value.
The distribution of shares to existing Western Digital shareholders is a significant aspect of the spin-off process. For each share held, investors are expected to receive a proportional stake in the new Flash business, representing a direct investment in the future of both companies.
The announcement of the spin-off and the affirmation of the Buy rating by TD Cowen could have implications for Western Digital's stock performance in the market. Shareholders and potential investors will be closely monitoring the progress of the spin-off and its impact on the company's financial metrics and market position.
In other recent news, Western Digital Corp has reported significant growth in its fiscal first quarter of 2025, with revenue hitting $4.1 billion and earnings per share increasing to $1.78. The company also announced an expansion of its 2021 Long-Term Incentive Plan by 6 million shares, a move aimed at providing equity-based compensation to key employees.
In terms of analyst upgrades, Citi has raised its outlook on SK Hynix shares, predicting a promising scenario for 4Q DRAM pricing.
These recent developments come as Western Digital continues to make progress with the separation of its Flash and HDD businesses, with the process expected to be completed by the end of the fiscal second quarter. For the next quarter, the company anticipates revenue between $4.2 billion and $4.4 billion, with projected earnings per share between $1.75 and $2.05.
However, it is worth noting that the company experienced operational dissynergies of approximately $30 million due to carrying dual cost structures. These facts underline the company's focus on optimizing profitability and executing strategic initiatives, as it navigates through the evolving industry dynamics.
InvestingPro Insights
As Western Digital Corp. (NASDAQ:WDC) prepares for its strategic spin-off, recent InvestingPro data provides additional context to the company's financial position. With a market capitalization of $24.0 billion, Western Digital is a significant player in the Technology Hardware, Storage & Peripherals industry. The company's revenue growth is particularly noteworthy, with a 48.91% increase in quarterly revenue as of Q1 2025, indicating strong market demand for its products.
InvestingPro Tips highlight that Western Digital is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.65. This suggests that the stock may be undervalued considering its growth prospects, which aligns with TD Cowen's bullish outlook and $80 price target.
Additionally, analysts predict that Western Digital will be profitable this year, which could be a positive factor for investors considering the upcoming spin-off. It's worth noting that 12 analysts have revised their earnings downwards for the upcoming period, which investors should keep in mind when evaluating the company's short-term prospects.
For those seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide deeper insights into Western Digital's financial health and market position. These additional tips could be particularly valuable as investors assess the potential impact of the Flash business spin-off on both the parent company and the new "Spinco" entity.
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