Market Overview

Buy The Dip In Western Digital, Longbow Says

Share:
Buy The Dip In Western Digital, Longbow Says
Related WDC
8 Biggest Price Target Changes For Monday
71 Biggest Movers From Friday
Apple suppliers recover despite Qorvo guide cut (Seeking Alpha)

Now is the time to buy into Western Digital Corp (NASDAQ: WDC), says Longbow analyst Joe Wittine. He reiterated Buy rating on the stock with a $120 price target, representing a near-40 percent upside from Friday’s open. The price target is “just 10x” the company’s calendar year 2017 EPS estimate of $12.

The analyst’s increasingly bullish view of the company stems from quickly weakening pressure regarding Toshiba and cyclical tailwinds brewing for the second half of the year.

Toshiba Drama Fading

Toshiba has been in the news recently over the sale of its highly valued chip manufacturing business. The sale was deemed necessary to cover the company’s failed nuclear power business.

A deal with a Japanese government-led group seemed to be a sure thing, but has been delayed by a lawsuit from Western Digital, which is a major investor in the chip business, claiming that Toshiba needs its approval to sell.

Western Digital has filed its own bid for the business, but has been hit back by a Toshiba countersuit.

Wittine believes Western Digital’s consent rights through its subsidiary SanDisk are “ironclad,” meaning it stands to capitalize on any deal to sell to the Japanese government’s consortium or any other bidder.

“We expect this would spur a relief rally, by eliminating investor concerns WDC would overpay for peak NAND earnings,” said Wittine.

NAND Is Not A Problem

In addition to the potential benefits of its claims over Toshiba, Wittine said that his previous statements on NAND spot, that it was topping back in early June, were premature.

NAND spot gains resumed in June, and are expected to ramp up even further moving forward.

Western Digital benefits significantly from Apple Inc. (NASDAQ: AAPL)’s iPhone production cycle. Smartphones make up about 40 percent of demand for NAND.

The company will also benefit from regular storage seasonality in the second half. Contract prices, which serve as a proxy for WDC given its limited spot participation, have continued to rise, up 2 percent month-over-month in June.

Related Links:

Analysts Applaud Micron's Beat-And-Raise Third Quarter

On Western Digital's Updated Guidance, B. Riley Still Prefers Marvell

Latest Ratings for WDC

DateFirmActionFromTo
Oct 2018CitigroupMaintainsBuyBuy
Oct 2018Loop CapitalDowngradesBuyHold
Oct 2018BMO CapitalMaintainsMarket PerformMarket Perform

View More Analyst Ratings for WDC
View the Latest Analyst Ratings

Posted-In: Joe Wittine Longbow toshibaAnalyst Color Analyst Ratings Tech Best of Benzinga

 

Related Articles (AAPL + WDC)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ACBIKeefe Bruyette & WoodsUpgrades21.0
COTYBMO CapitalUpgrades12.0
ECCOppenheimerDowngrades0.0
VYGRRaymond JamesUpgrades0.0
ATNXJP MorganUpgrades15.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

5 Biggest Price Target Changes For Friday

Analyst Fights The Temptation To Sell Kimberly-Clark