On Friday, Goldman Sachs adjusted its outlook on Western Digital Corp. (NASDAQ:WDC), increasing the price target to $81 from the previous $72, while keeping a Neutral stance on the stock.
The firm acknowledged Western Digital's strong performance in the first quarter of the fiscal year, highlighting record non-GAAP gross margins of 38.1% in the HDD division. The company's enterprise SSD (eSSD) segment also saw sequential revenue growth, despite a difficult NAND market.
Western Digital's forecast for the second fiscal quarter, ending in December, was more optimistic than expected. The firm anticipates that the strength in the Data Center sector, including Nearline HDD and eSSD, will largely compensate for the anticipated softness in the PC, smartphone, and consumer end-markets due to inventory challenges.
Management confirmed that the planned separation of the business units is progressing, with the soft spin completed at the beginning of the second fiscal quarter and the intention to file its Form 10 within the next few months.
Goldman Sachs made slight positive adjustments to their earnings estimates for Western Digital based on these results. However, the investment firm maintained a Neutral rating on the stock, citing limited potential for upside and suggesting that they are waiting for a more favorable moment to change their investment stance. The firm's detailed analysis and updated Bull/Bear framework are available in their full note on the company.
In other recent news, Western Digital Corp has seen a series of noteworthy developments. Citi has adjusted its price target for the company to $87, maintaining a Buy rating, in light of earnings that were described as "better than feared." The company's management has also indicated an expected growth in revenue across both business units.
TD Cowen, despite lowering the price target from $95.00 to $80.00, has maintained a Buy rating on Western Digital, in anticipation of the company's planned spin-off of its Flash business.
In a significant legal development, Western Digital has been ordered to pay $315.7 million in a patent infringement case initiated by SPEX Technologies.
Meanwhile, Western Digital has registered for the potential resale of shares of its preferred and common stock, a move that provides the company with flexibility in its capital structure management.
The company has reported strong Q4 and full fiscal year 2024 results, with Q4 revenues reaching $3.8 billion and full-year revenues totaling $13 billion. Western Digital anticipates continued growth, driven by demand in AI data storage, and expects revenue for the first quarter of fiscal year 2025 to be between $4 billion and $4.2 billion.
These are among the recent developments surrounding Western Digital.
InvestingPro Insights
Western Digital's recent performance and Goldman Sachs' optimistic price target adjustment are supported by several key metrics from InvestingPro. The company's market capitalization stands at $22.77 billion, reflecting its significant presence in the Technology Hardware, Storage & Peripherals industry.
InvestingPro data shows that Western Digital's revenue for the last twelve months as of Q4 2024 was $13.0 billion, with a notable revenue growth of 40.87% in the most recent quarter. This aligns with Goldman Sachs' observation of strong performance in the first fiscal quarter and the company's optimistic forecast for the second quarter.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, which corroborates Goldman Sachs' positive outlook. Additionally, the tip indicating that Western Digital's net income is expected to grow this year supports the firm's decision to increase the price target.
It's worth noting that Western Digital has shown a high return over the last year, with a 1-year price total return of 57.23% as of the latest data. This performance may contribute to Goldman Sachs' increased price target, despite maintaining a Neutral stance.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Western Digital, providing a deeper understanding of the company's financial health and market position.
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