Western Digital Analyst Highlights Growth in Nearline Drive and NAND Market Recovery, Upgrades Stock

Benchmark analyst Mark Miller upgraded Western Digital Corp WDC from Hold to Buy and a $85 price target.

Miller said Western Digital produced significant upside results, driven by improving flash pricing and nearline drive sales. 

He noted continued improvements in NAND pricing and Nearline sales as 2024 progresses. 

Also Read: Western Digital Poised For Breakout, Analyst Sees 10% Estimate Beat And Powerful NAND Recovery

Miller now projects fiscal 2025 adjusted EPS of $6.84 on sales of $16.5 billion. 

Western Digital's third-quarter adjusted EPS of $0.63 was an upside to investor expectations by $0.58, while sales of $3.46 billion were $100 million above investor expectations, the analyst stated.

HDD sales were up 28.2% sequentially and 17.1% year over year to $1.75 billion. Improving nearline sales aided results driven by hyperscale customers. Shipments of 24 TB and 28 TB SMR drives represented 50% of Nearline shipments, he noted.

Driven by higher ASPs, flash sales grew by 2.4% sequentially to $1.71 billion and were up by 30.5% year over year. Miller added that NAND ASPs sequentially increased by 18% on both a like-for-like and blended basis.

Cloud sales were up 43.1% year over year and 27.2% year over year to $1.53 billion, representing 44% of total sales. HDD ASPs increased by $23 sequentially to $145. Miller said the sequential growth was attributed to higher Nearline shipments and better pricing.

Client sales grew by 4.6% year over year to $1.17 billion and by 20.4% sequentially, representing 34% of March quarter sales. An increase in flash ASPs was more than offset by a decline in flash shipments. 

Miller said the Y/Y increase was driven by growth in both flash and HDD ASPs and flash bit shipments.

Consumer sales fell 13% sequentially to $0.73 billion but were up 17.2% year over year. Flash and HDD were down by approximately similar rates and in line with seasonality. Miller added that the year-over-year increase was driven by growth in flash bit shipments and ASPs.

March quarter adjusted gross margins were 29.3% versus 15.5% in the December quarter. HDD adjusted gross margins sequentially improved from 24.8% to 31.1%, while Flash adjusted gross margins sequentially improved from 7.9% to 27.4%. 

Miller projected fourth-quarter revenue and EPS of $3.75 billion and $1.17.

Western Digital stock gained over 113% in the last 12 months. Investors can gain exposure to the stock via IShares Future Cloud 5G And Tech ETF IDAT and Columbia ETF Trust I Columbia Seligman Semiconductor And Technology ETF SEMI.

Price Actions: WDC shares traded higher by 1.87% at $70.74 on the last check Friday. 

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