Citi Raises Price Target On Western Digital

Citi raised its price target on Western Digital Corp WDC Wednesday from $110 to $125.

Analyst Joe Yoo believed “WDC will be a key beneficiary [of PC growth] given that PCs still account for over 60 percent of total HDD units. Moreover, following the recent resolution with the Chinese regulator on two minor infractions, the probability of a MOFCOM approval has significantly increased.”

Yoo noted that his “non-consensus call that the PC market will return to positive growth [in 2016-17] is based on the following: 1) emerging markets (EM), particular for commercials PCs, are still an area of sustainable growth, 2) tablet growth is slowing dramatically, posing less risk to PC sales, and 3) the headwind to CY15 growth, following a temporary demand boost from Win XP expiration, is more modest than investors believe.”

In addition, “Chinese regulators are finally focused on reviewing the company's application asking for full integration with HGST. We feel more confident that an approval could occur in 2015—which could result in >$400M in opex savings, raising EPS by 20 percent.”

Yoo concluded by noting that “according to Trend Focus, the supply chain is indicating a 4CQ HDD demand of 145-147M units, better than the 145M that WDC is guiding. The upside appears to be driven by stronger ODM notebook builds as well as continued strength in nearline.”

Western Digital Corp recently traded at $108.44, up 3.78 percent.