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Western Digital Corporation: Trendsetter in Storage Devices
Stock Analysis & Ideas

Western Digital Corporation: Trendsetter in Storage Devices

I am bullish on Western Digital Corporation (WDC) as Wall Street analysts are overwhelmingly bullish on it, the average price target indicates decent upside potential over the next year, the valuation multiples look cheap relative to historical averages, and growth is expected to be strong for the foreseeable future.

Western Digital Corporation is a trendsetter in storage devices with a slew of inventions under its name, including 3D NAND and headways into cloud technology. Today, WDC is one of the largest manufacturers of hard disc drives in the world, along with a sizable production of SSDs and flash memory devices.

Moreover, the company acquired a number of competitors including Hitachi Global Storage Technologies and SanDisk, leaving it as one of the most dominant data infrastructure companies in the world.

Strengths

The company’s raw price movement on the NASDAQ has its fair share of ups and downs, with highs of $77 and lows of $61, but it hovers around $66.64 with an upward trend. The market capitalization for Western Digital is nearly $20.76, making it one of the most valuable companies by market cap. 

That said, WDC’s share is relatively volatile, which means the price could sink lower, giving investors an opportunity to buy stock later on at more affordable prices.

Western Digital Corporation has very few competitors in this space and the barriers to entry continue to be extremely high, especially for new entrepreneurs. Given the increasing demand for storage devices, and WDC’s dominant position in the market, their stock is valuable for long-term investment. 

Recent Results

Western Digital’s first-quarter revenue for 2021 was a whopping $5.1 billion, representing a 29% year-over-year growth. 

This year, it also managed to realize growth in its cloud investments, which increased by 72%. At the time of writing, the company has assets worth $25.66 billion and counting.

Valuation Metrics

WDC stock looks reasonably priced here as it trades around its historical averages on an EV/EBITDA ratio and price to normalized earnings per share basis. 

Its EV/EBITDA ratio is 5.2 times compared to its historical average of 4.7 times and its price to normalized earnings per share ratio is 6.5 times compared to its historical average of 9.3 times. 

Analysts expect revenue to increase by 15.1% in 2022 and normalized earnings per share to increase by 89.8% in 2022.

Wall Street’s Take

According to Wall Street analysts, WDC earns a Strong Buy analyst consensus based on 11 Buy ratings, three Hold Ratings, and zero Sell ratings in the past three months. Additionally, the average Western Digital price target of $76.64 puts the upside potential at 37.9%.

Summary and Conclusions

WDC stock is backed by a leading global technology business that possesses significant intellectual property rights, has a proven research and development team, and is expected to grow at a strong clip for years to come. 

Moreover, its valuation multiples look reasonable relative to its historical averages and Wall Street analysts are overwhelmingly bullish on the stock with the average price target implies decent upside of the next year.

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