Janice R. Andrews
Unexpectedly, Joseph Moore, a semiconductor analyst at Morgan Stanley, has chosen Western Digital (WDC) over the previously preferred Nvidia (NVDA) as the best chip option. Moore’s positive view of Western Digital’s future, which is spurred by the company’s impending split into two entities—one focused on disk drives and the other on NAND flash memory chips—supports this strategic change.
Following Moore’s remark, shares of Western Digital are now trading 3.6% higher at $56.74 as of Monday. The analyst’s lofty price objective of $73 is a stunning 33% rise from Friday’s $54.77 closing price. This big change demonstrates Morgan Stanley’s belief in Western Digital’s stock’s future growth.
Among the stocks he covers, Moore claims in a recent research note that Western Digital’s shares provide the most risk-reward potential. This confidence, he says, stems from the separation that will soon take place and will “unlock material value.” The analyst notes that Western Digital and its peers currently have a “valuation disparity” that is “extremely compelling.”
It is anticipated that the upcoming division into two businesses, one concentrating on disk drives and the other on NAND flash memory chips, will revolutionize the industry. Moore claims that this division makes the story easier to follow and makes it possible to evaluate Western Digital’s worth in a clear-cut and persuasive way. He emphasizes the strategic importance of the NAND business while placing the company’s hard-disk drive business on par with rival Seagate Technology.
Moore observes that business circumstances have significantly improved, especially in the flash memory industry, where prices have increased by more than 20% over the previous quarter. Furthermore, he notes that the hard-disk drive industry is gradually recovering from the difficult market circumstances of 2023.
The analyst has updated his forecasts for Western Digital, predicting $3.49 billion in revenue and a profit per share of 24 cents for the quarter ending in March. This is a big rise from his original projection of $3.2 billion in revenue and a loss of 72 cents a share. Moore has revised his earnings projection for 2024 to $4.18 per share, a substantial increase above the previous estimate of $2.07.
Moore claims that Western Digital’s sum-of-the-parts assessment is clear-cut and persuasive. With the drive business accounting for $33 per share and the flash memory business for $40 per share, he sets a target price of $73. The analyst’s conviction in the strategic worth of Western Digital’s diverse emphasis is reflected in this valuation.
To sum up, Morgan Stanley’s decision to rename Western Digital as its top chip pick is a clear indication of the firm’s optimism about the future. Western Digital is positioned as an attractive investment opportunity with the potential to unlock significant value, thanks to the impending separation and improved business conditions. Investors will be keenly monitoring the company’s progress toward its strategic goals and the state of the semiconductor industry as change.
