Why Are Western Digital (WDC) Shares Soaring Today

Kayode Omotosho /
2024/01/16 3:05 pm EST

What Happened:

Shares of leading data storage manufacturer Western Digital (NASDAQ: WDC) jumped 5% in the morning session after the stock earned a double rating upgrade from Wall Street analysts. Deutsche Bank analyst Sidney Ho upgraded the stock's rating from Hold to Buy and raised the price target from $45 to $65. The price target indicates a potential 25% upside from where shares traded when the upgrade was announced. Similarly, Barclays raised the WDC's rating from Equal Weight (Hold) to Overweight (Buy) and added it to its list of favorite stocks for the "2nd Wave of AI." The list featured other semiconductor stocks like AMD (NASDAQ:AMD), Coherent (NYSE:COHR), NXP Semiconductors (NASDAQ:NXPI), and Camtek (NASDAQ:CAMT). After the initial pop the shares cooled down to $52.05, up 4.1% from previous close.

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What is the market telling us:

Western Digital's shares are quite volatile and over the last year have had 11 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock gained 14.8% on the news that the company reported first-quarter results that blew past analysts' EPS expectations, driven by strong outperformance in its flash memory division. We were also glad its inventory levels shrunk. On the other hand, its operating margin fell, and its gross margin shrunk. Aside from the earnings print, Western Digital said it would separate its HDD and flash memory businesses into two independent, public companies. The spin-off comes after activist hedge fund Elliot Management disclosed a nearly $1 billion stake in the company last year. Elliot is known for pushing its portfolio companies to pursue value-added strategies for shareholders. The transaction is targeted for the second half of calendar year 2024. Overall, it was a mixed quarter for the company.

Western Digital is up 2.4% since the beginning of the year, and at $52.05 per share it is trading close to its 52-week high of $52.93 from December 2023. Investors who bought $1,000 worth of Western Digital's shares 5 years ago would now be looking at an investment worth $1,376.

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