Jefferies Initiates Coverage On "Top Pick" Western Digital Corp.

Jefferies initiated coverage on Western Digital Corp. WDC with a Buy rating and $124 price target, and called it a “Top Pick.”

Analysts led by James Kisner named Western Digital their “Top Pick" in the IT Hardware space as they believed “the company will benefit from: 1) robust storage growth in public and private clouds and potential share gain from their Helium-based drives; 2) acquisitions that have seeded growth opportunities in flash- based storage; 3) improving fundamentals in the PC industry; 4) an embedded 'call option' on regulatory approval from China for WDC to finally integrate their subsidiary HGST that could be 15 percent accretive to CY15 EPS."

The report noted that “we have clearly seen the impact of transitions and disruption in the hardware and Storage Markets, we expect enterprise investments in storage to re-accelerate as CIOs get more confident in their longer-term strategies around Big Data and the Cloud."

The firm was most bullish on the HDD/SSD vendors Western Digital and Seagate Technology PLC STX and expected "them to benefit from robust data growth and adoption of commodity storage solutions."

The report's EPS estimates were $8.32 for 2014 and $9.0 for 2015. The P/E valuation was 11.5x for 2014 and 10.6x for 2015.

Western Digital Corp. recently traded at $91.93, down 1.56 percent.