Morgan Stanley Maintains Overweight on Western Digital, $106.00 PT

In a report published Thursday, Morgan Stanley analyst Katy Huberty maintained Overweight on Western Digital Corporation

, with a $106.00 price target. According to the report, WDC broke through the 30 percent gross margin level even without upside from PC volumes and cloud mix, both of which should improve as analysts move through CY14. THey continue to like WDC as a gross margin expansion story with $1.58 of potential EPS upside from HGST integration not in Street models. “WD saw upside in notebooks (+6% Y/Y vs. -11% in C3Q) but lost share in desktop where the market is stable,” the report noted. “We see room for PC-related upside near-term given 1) low HDD and PC channel inventory levels and 2) cautious PC OEM outlooks despite the potential positive impact from Windows XP expiration, slowing desktop virtualization, slowing tablet growth, and improving economies.” WDC closed Wednesday at $86.48 with shares trading down at 1.42 percent.