Western Digital Stock Surges After Morgan Stanley Doubles Price Target
Analyst cites a 'stronger for longer' demand cycle for hard disk drives, fueled by the explosive growth of cloud computing and AI.
Shares of Western Digital (WDC) surged over 17% this week, propelled by a major vote of confidence from Wall Street. The rally followed a report where Morgan Stanley significantly upgraded its outlook on the data storage manufacturer, nearly doubling its price target to $171 from a previous $99 and designating the company as a new 'Top Pick'.
The investment bank's bullish stance is rooted in its conviction that the hard disk drive (HDD) market is entering a 'Stronger for Longer' cycle. This extended period of high demand is driven by massive investments in cloud infrastructure and the accelerating data needs of artificial intelligence. , a significant revision of previous forecasts.
The demand for high-capacity HDDs has 'inflected higher,' according to the firm, as cloud providers expand their data centers to handle the deluge of information generated by AI applications. Despite the prevalence of solid-state drives (SSDs), HDDs remain the most cost-effective solution for large-scale data storage, with analysts estimating that .
This surge in demand has created a significant supply crunch, with the market estimated to be as much as 10% undersupplied. In response to these conditions, , citing unprecedented demand and extended wait times for its products. This pricing power, combined with the industry's oligopolistic structure dominated by Western Digital and Seagate Technology, is expected to drive significant financial gains.
Looking ahead, Morgan Stanley projects a robust financial future for the company, forecasting more than 35% compound EPS growth and operating margins exceeding 30%. The firm's analysis suggests that the current market dynamics justify a higher valuation for Western Digital than in previous cycles, reflecting a fundamental shift in the data storage landscape.