The shares of Western Digital (NASDAQ: WDC) garnered the market’s attention after Rosenblatt Securities upgraded the memory chip maker’s rating to Buy from Neutral. The stock of Western Digital ended Friday’s trading session at $73.11, up $2.57, or 3.64%, from the prior close.
Rosenblatt’s analysts cited favorable trends in NAND Flash prices and increasing momentum as the primary reasons for the upgrade. They highlighted industry data indicating a projected sequential increase of 15% or more in NAND Flash average price benchmarks during the second quarter of 2024. This surge is anticipated due to rising demand, a decrease in inventory levels, and systematized capacity management within the industry.
The firm adjusted its assumptions regarding NAND Flash average selling prices (ASPs) in its financial model for the forthcoming four quarters, reflecting the expected price hikes. Additionally, Rosenblatt emphasized its observation of the NAND Flash requirement as being price-flexible, implying that demand is likely to respond positively to changes in price.
Rosenblatt also pointed out that considerable additional capacity increases in the industry are not expected until gross margins reach the mid-30% scale. This suggests a level of cautiousness among industry players regarding capacity expansion until profitability targets are met.
Western Digital’s stock responded positively to the upgrade, with shares rising by 2.7% to $72.1 in early trading. This increase follows Rosenblatt’s new price target, which represents the highest target on Wall Street for Western Digital’s stock.
The projected increase in NAND Flash memory chip prices is significant for Western Digital, as it commands the third-largest market share globally in this segment. NAND Flash memory chips are commonly utilized in memory cards, hard drives, and various other electronic products.
Furthermore, Rosenblatt’s upgrade aligns with the broader market sentiment regarding Western Digital. Analysts at Seeking Alpha have assigned a hold rating to the stock, while Wall Street analysts have given it a buy rating. Seeking Alpha’s quantitative rating system, which has a track record of outperforming the market, also rates Western Digital as a hold.
In a separate development, Evercore ISI initiated coverage on Western Digital with an Outperform rating and set a price target of $80 per share. Evercore sees potential for a cyclical increase in the digital memory market and anticipates streamlining Western Digital’s business strategy as key factors driving its Outperform rating. The firm anticipates an upturn and consolidation in both the HDD (hard disk drive) and flash memory (NAND) markets, with particular optimism for NAND market recovery in 2024. Despite Seeking Alpha’s Hold rating, Evercore’s bullish outlook suggests positive sentiment surrounding Western Digital’s future prospects.
Based on the above facts, while upgrading the stock, Rosenblatt Securities also upwardly revised the stock’s price target to $115 per share from the $65 issued earlier.
The rating upgrade is expected to keep the stock of Western Digital slightly bullish in the near term.
The historical price chart indicates that the stock of Western Digital is rising after breaking the ascending triangle formation. The stock is also trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate Western Digital’s stock to remain in an uptrend in the near term.
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