Tuesday, Mizuho sustained its positive stance on Western Digital Corporation (NASDAQ:WDC), increasing the stock's price target to $80 from the previous $66 while maintaining a Buy rating on the shares. The firm recognized potential pricing advantages and the prospective value to be gained from a spinoff of the company's NAND business.
In the announcement, the firm acknowledged that Western Digital is poised to benefit from favorable pricing trends. The maintained outlook for the current quarter remains at $3.3 billion in revenue with $0.05 earnings per share, aligned with consensus estimates of $3.3 billion and $0.13 EPS.
Looking ahead, the firm has adjusted its full-year 2024 revenue and earnings estimates upward, from $12.7 billion and $2.00 per share to $12.8 billion and $1.58 per share, surpassing the consensus projections of $12.4 billion in revenue and $1.55 EPS. The forecast for fiscal year 2025 has also been upgraded, with revenue now expected to reach $17.1 billion from the previous $16.3 billion and earnings per share anticipated to jump from $4.84 to $6.56, again outperforming consensus estimates of $16.2 billion in revenue and $5.85 EPS.
Moreover, the firm's projections for fiscal year 2026 suggest a slight increase in revenue, from $18.2 billion to $18.3 billion, and a more significant rise in earnings per share from $6.48 to $6.82, compared to the consensus of $17.5 billion in revenue and $6.03 EPS.
The revised price target of $80 is based on approximately 1.5 times the firm's June 2025 estimated price-to-sales ratio, up from the prior multiple of about 1.3 times. This valuation remains conservative relative to Western Digital's peer Seagate Technology, which trades at approximately 2.2 times its sales.
The firm also noted that even with the NAND industry's positive momentum, the new target is still cautious compared to a potential sum-of-parts valuation of around $85 following a spinoff.
InvestingPro Insights
Western Digital Corporation (NASDAQ:WDC) has been the subject of bullish sentiment, as reflected in Mizuho's recent price target increase and Buy rating. Complementing this outlook, InvestingPro data reveals a market capitalization of $23.82 billion and a challenging P/E ratio standing at -10.06, indicating that the stock is not trading on earnings but rather on other factors such as market sentiment and future growth prospects. The revenue for the last twelve months as of Q2 2024 is reported at $11.26 billion, with a notable decline of -28.54% from the previous period, suggesting that while optimism is present, the company faces significant headwinds.
Two InvestingPro Tips highlight key considerations for investors: Firstly, seven analysts have revised their earnings upwards for the upcoming period, signaling potential confidence in the company's prospects. Secondly, the stock's recent performance indicates a strong return over the last year with a 107.54% price total return, which may intrigue growth-focused investors. However, it's important to note that the company has not been profitable over the last twelve months, which could be a cause for caution.
For investors seeking a more comprehensive analysis, there are over 10 additional InvestingPro Tips available that delve deeper into Western Digital's financial health and market position. Those interested in accessing these insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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