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On Tuesday, JPMorgan reiterated its Overweight rating and $57.00 price target for Western Digital Corp (NASDAQ:WDC), aligning with the broader analyst consensus. The stock, currently trading at $49.01, has shown strong momentum with a 10.68% gain in the past week. The firm’s analysis highlighted that Western Digital is well-positioned in the near term, with minimal impact from tariffs expected due to the company’s strong engagement in cloud and hyperscale spending. Orders from two major customers have been secured, extending visibility into the first half of 2026. According to InvestingPro, 16 analysts have recently revised their earnings estimates upward, suggesting growing confidence in the company’s outlook.
Despite this positive outlook, JPMorgan noted potential weaknesses in the enterprise, client, channel, and retail segments of Western Digital’s business. These areas contribute to a smaller portion of revenue, representing 10-15% of the company’s $15.61 billion in annual revenue. Nonetheless, strong demand trends from cloud and hyperscalers are anticipated to bolster near-line HDD demand, benefiting from Western Digital’s leadership in high-capacity near-line drives.
Western Digital’s product execution remains robust, with successful shipments of its 26TB CMR and 32TB ultraSMR drives. The company is also on track to launch its next-generation 28TB CMR and 36TB ultraSMR drives in the second half of the year, with customer qualification expected in the first half of the following year. The transition to HAMR-based technology is progressing, with positive customer feedback and confidence in ramp timing.
In terms of financial health, Western Digital is seeing an expansion in operating margins due to gross margin and operational efficiencies, with current gross margins at 28.56%. Yield improvements have been significant, rising from the 60s to a high range of 80s to 90%. JPMorgan also pointed out Western Digital’s commitment to returning all excess free cash flow to shareholders once a net leverage ratio of 1-1.5x is achieved. This strategy will likely support future shareholder returns, though the company currently does not pay a dividend. For deeper insights into Western Digital’s financial metrics and growth potential, explore the comprehensive analysis available on InvestingPro, which offers exclusive access to over 30 key financial indicators and expert recommendations.
In other recent news, Western Digital Corp. announced a new $2 billion share repurchase program, emphasizing its commitment to shareholder value. This initiative, which was immediately authorized by the Board of Directors, allows the company to buy back shares through various methods, including open market transactions. BofA Securities reiterated a Buy rating for Western Digital, maintaining a price target of $62. The firm highlighted the company’s potential for substantial share repurchases, which could significantly enhance earnings per share by the end of 2026. Additionally, Argus Research adjusted its price target for Western Digital to $65, citing ongoing supply chain challenges but maintaining a Buy rating. The company’s recent appointment of Kris Sennesael as the new Chief Financial Officer is expected to drive growth through his extensive experience in the semiconductor and technology sectors. Western Digital’s CEO, Irving Tan, expressed optimism about the company’s future, underscoring a strategic focus on reinvestment, debt reduction, and capital returns to shareholders. Investors should note that these developments reflect Western Digital’s proactive approach to financial management and growth strategies.
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