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Tuesday, Western Digital Corp (NASDAQ:WDC), a $23.79 billion market cap technology hardware giant, received a continued vote of confidence from Cantor Fitzgerald, as the firm reiterated its Overweight rating and $95.00 price target for the company’s stock. According to InvestingPro data, analyst targets range from $52 to $100, with the stock currently trading slightly above its Fair Value. The endorsement follows Western Digital’s Analyst Day held earlier in the week, after which Cantor Fitzgerald had the opportunity to host the company’s management for investor meetings.
Cantor Fitzgerald’s analyst expressed high regard for Western Digital’s incoming CEO, Irving Tan, praising his timely and suitable experience for guiding the company into a new phase of growth. The analyst’s optimism appears well-founded, as InvestingPro data shows the company achieved impressive revenue growth of 38.59% over the last twelve months, with net income expected to grow further this year. The analyst believes Tan is well-equipped to transform Western Digital into a "Free Cash Flow Per Share machine."
The analyst also noted that the demand for Hard Disk Drives (HDD) remains robust. The industry, characterized by a few dominant players, is strategically focused on delivering value to customers through Total (EPA:TTEF) Cost of Ownership, high quality, and reliability. Simultaneously, the industry is exercising restraint in capacity additions, opting for growth through ’Exabytes per unit’ expansion and sustaining pricing power. This strategy is anticipated to support a trajectory of increasing margins, with the new 38% gross margin representing a baseline rather than a peak. The company’s current gross profit margin stands at 34.63%, with an EBITDA of nearly $3 billion, according to recent financial data.
Moreover, the analyst forecasts that Western Digital will achieve its desired net leverage within the next 6 to 9 months. This financial positioning is expected to pave the way for the company to distribute 100% of its free cash flow generation back to its shareholders, signaling a potential boon for investor returns.
The reaffirmed rating and price target reflect Cantor Fitzgerald’s optimistic outlook on Western Digital’s financial strategies and leadership at the helm. The firm’s analysis suggests that Western Digital is well-positioned to capitalize on market dynamics and strengthen its financial health, ultimately enhancing shareholder value.
In other recent news, Sandisk Corporation has announced significant amendments to its security holders’ rights and its Articles of Incorporation or Bylaws. This is a part of the company’s ongoing separation from Western Digital Corporation. In parallel, Western Digital, focusing on HDD, storage platforms, and technological innovation, has projected confidence in its gross margin progress and its industry position. Analysts from Cantor Fitzgerald have maintained an Overweight rating on Western Digital, citing the potential value from the anticipated split of Western Digital’s NAND business.
Similarly, Sandisk held its first investor day, providing near-term and through-cycle financial outlook and detailed discussions around its product and technology roadmap. Analysts from Cantor Fitzgerald reiterated their Overweight rating on Western Digital, highlighting the company’s potential for a higher valuation based on several factors. They also underscored the significant potential for appreciation following the separation of the company’s SSD and HDD businesses. These are recent developments in the corporate landscape of both Sandisk and Western Digital.
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