Western Digital (WDC) Stock Forecast & Price Target

Western Digital is poised for significant revenue growth driven by its increasing exposure to the cloud segment, projected to constitute 88% of its revenue by FY25, up from 75% in FY22. The company is also positioned to benefit from the expanding total addressable market (TAM) for nearline HDDs, which is expected to grow at a 14% compound annual growth rate (CAGR) from $13 billion in CY24 to $23 billion in CY26, bolstered by the generative AI wave. Additionally, the introduction of a quarterly dividend starting in Q4 FY25, with expectations for meaningful growth in the following years, reflects a positive long-term outlook for Western Digital’s financial health.

The negative outlook on Western Digital's stock is primarily driven by concerns over potential oversupply and pricing weakness, which could lead to lower profitability in a cyclical industry that is unlikely to see normalized earnings power improve. Additionally, investor disappointment regarding the company's gross margin guidance, which fell short of expectations that targeted 40% or higher, has contributed to a decrease in share value. Furthermore, while Western Digital is prioritizing profit over market share to manage supply, this strategy may result in extended periods of undersupply, creating further uncertainty in its financial future.