Western Digital Ups Guidance On Strong Demand, Fundamental Execution

Western Digital Corp WDC raised its December quarter guidance and provided an update for its long-term model.

Expressing increased confidence in the sustainability of Western Digital’s solid fundamentals, BTIG’s Edward Parker said in a report that the company should be able to maintain its cost leadership throughout 3D NAND.

Parker reiterated a Buy rating on the company, while raising the price target from $66 to $85.

The transition of SanDisk Corporation SNDK to 3D NAND remains on track, and is expected to achieve cost cross-over with the current 2D technology in H1 2017. Parker stated that SanDisk’s leading gross margin profile appears sustainable, given management’s decision to “not productize 3D until the economics of doing so become sufficiently attractive.”

New Target Model Unveiled

Western Digital updated the long-term model of 4-8 percent revenue growth, 33-38 percent gross margin, and 18-23 percent operating margin. This provides clarity into the company once the SanDisk/HGST integration is complete.

The analyst raised the EPS estimates for F17 and F18 from $6.67 to $7.01 and from $8.15 to $8.51, respectively. He added that the upward revision in price target reflected “the company’s strong execution during these first crucial months of the Sandisk acquisition.”