Western Digital Shares Jump Despite Revenue Miss, Ready To Spin Off NAND Business: Q4 Guidance 'Much Better Than Feared,' Analyst Says

Shares of Western Digital Corp WDC were spiking in early trading on Friday, after the company reported upbeat fiscal first-quarter earnings.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

• Cantor Fitzgerald analyst C.J. Muse maintained an Overweight rating, while lifting the price target from $80 to $95.
• Benchmark analyst Mark Miller reiterated a Buy rating and price target of $92.
• RBC Capital Markets analyst Matt Bryson reaffirmed an Outperform rating and price target of $95.

Check out other analyst stock ratings.

Cantor Fitzgerald: Western Digital reported revenues of $4.10 billion, up 49% year-on-year, but missing consensus of $4.12 billion, Muse said in a note. Earnings came in at $1.78 per share, surpassing Street expectations of $1.71 per share, he added.

Management's guidance for the fourth quarter was "much better than feared," the analyst stated. "While the Gross Margin uplift story is taking a pause into the December Q, we continue to look for both HDD and NAND gross margins to continue to push higher leading to earnings power of $9+ in CY25 (cons $8.74) and $10+ in CY26 ($7.57)," he further wrote.

The company's NAND spin remains on track for the first quarter of 2025, Muse added. Its estimated value as a standalone business is expected to be anywhere between $10 billion and $22 billion.

Benchmark: Western Digital's in the data center performance continued to recover, driven by "strong demand for enterprise SSD products," Miller said. The HDD segment delivered record revenues and margins due to record data center sales, he added.

Western Digital's NAND market share has contracted significantly over the past three quarters, the analyst stated. "A second wave of regenerative AI is seen as an opportunity in 2HFY25," he further wrote.

RBC Capital Markets: Gross margins in the HDD segment expanded by 200 bps to 38.1%, "a record level for WDC and we believe the industry," Bryson wrote. The NAND segment's gross margins improved to 38.9%, with ASPs (average selling prices) growing by 4% sequentially, he added.

"Guidance calls for revenues and EPS to lift Q/Q, with margins only expected to moderate slightly (down 50 bps at the midpoint of guidance)," the analyst said. Following the completion of the soft spin, Western Digital's NAND and HDD businesses are now running separately and the formal split is expected to close in the fiscal second quarter, he further stated.

Price Action: Shares of Western Digital had risen by 8.23% to $71.78 at the time of publication on Friday.

Read More:

• Monopar Therapeutics, Intellia Therapeutics, Capri Holdings, Western Digital, And Tesla: Why These 5 Stocks Are On Investors’ Radars Today

Image: Shutterstock