TD Cowen analyst Krish Sankar has maintained their bullish stance on WDC stock, giving a Buy rating today.
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Krish Sankar has given his Buy rating due to a combination of factors that highlight Western Digital’s strong market position and financial performance. The company’s gross margins are expected to reach an all-time high, surpassing 40% in the upcoming quarter, which is a significant achievement in the industry. This is attributed to the strength of Western Digital’s SMR platform, particularly its 11-disk 24TB CMR and 32TB SMR platforms, which contribute positively to margins due to strong pricing.
Additionally, Western Digital is on track to reduce its leverage ratio significantly, with expectations to lower it from 1.7x to 1.1x by September. This financial improvement is supported by potential debt reduction and share repurchases, which are seen as catalysts for reaching the price target. Furthermore, the company has managed to mitigate risks associated with rare earth export controls by securing alternative sources, ensuring stability in its supply chain. These strategic moves, along with maintaining a strong market share in the nearline segment, underpin the positive outlook and Buy rating.