Western Digital (WDC) came under pressure after Google introduced its TurboQuant compression algorithm, a tool designed to reduce memory usage for large-scale AI models, prompting investors to reassess their memory hardware needs.
Check out our latest analysis for Western Digital.
The recent backlash over Google’s TurboQuant news comes after Western Digital’s strong performance with a 90-day stock return of 51.67% and a very strong one-year total shareholder return. While short-term momentum looks fragile, long-term performance remains strong.
If you’re focused on how the AI hardware story impacts storage names, you might also find it helpful to check out 35 AI Infrastructure Stocks to broaden your search to other AI-related infrastructure opportunities.
After a 90-day gain of 51.67%, a very strong 1-year total return, and new questions about AI memory demand, is Western Digital still priced wrong, or has the market already priced in all its future growth?
Most popular story: 14.2% underrated
Western Digital’s most favored narrative has a fair value of $321, above the previous close of $275.34, on the back of the recent AI-driven pullback.
Western Digital has successfully rebranded itself as ‘Pure-Play’, the king of mass storage. By eliminating the unstable NAND flash segment, the company is allowing its nearline HDD business to shine as the fundamental backbone of the AI data economy.
Read the whole story.
Want to know how a pure play in storage can reach higher values? This story hinges on rapid revenue expansion, richer profits, and future revenue multiples, with HDDs remaining at the center of AI data growth.
Result: Fair value $321 (undervalued)
Read the full explanation to understand what’s behind the predictions.
However, this depends on hyperscalers remaining committed to building HDD-intensive AI, and whether Western Digital can keep pace with HAMR while maintaining tight capex.
Find out about Western Digital’s key risks to this story.
Another angle on value
This $321 fair value story exists alongside a different message than the numbers. Western Digital’s P/E ratio of 23.7x is higher than its peer group’s 21.4x and Global Tech’s overall average of 21.9x, but below the 40.1x P/E ratio that the market should aim for.
Does this price simply reflect momentum and recent strong performance? Or does the difference with the higher fair ratio suggest there is room for further execution if earnings hold up? In any case, what needs to change in the story for the market to revalue the multiple?
See what the numbers say about this price. Please check the rating breakdown.
next step
Given the mix of optimism and caution in this story, it makes sense to act fast, see the data for yourself, and weigh both sides with 2 key rewards and 3 key warning signs.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
Evaluation is complex, but we will simplify it here.
Discover whether Western Digital is undervalued or overvalued with our in-depth analysis. Fair value estimates, potential risks, dividends, insider transactions, and financial condition.
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