Bank of America (BAC) raised its Western Digital (WDC) price target to $800 from $720 on Oct. 21, even after lowering its estimate for how quickly the hard-drive maker’s storage-capacity shipments will grow.
Western Digital makes high-capacity hard drives used by hyperscalers, cloud providers, and other enterprise customers to store large amounts of data.
BofA analyst Wamsi Mohan expects Western Digital’s fiscal first-quarter exabyte shipments to increase 21% from a year earlier, below management’s longer-term target of roughly 25%. Exabyte growth measures the amount of storage capacity the company ships.
At the same time, BofA expects Western Digital’s average price per terabyte to rise 24% from a year earlier. Demand for hard-drive storage continues to exceed available supply, giving manufacturers room to charge more for each unit of storage capacity, according to the bank.
Western Digital shares rose 3.89% to close at $378.51 on Oct. 21.
The company will report fiscal first-quarter results after the market closes Thursday, Oct. 22. BofA expects revenue of $4.22 billion and adjusted earnings of $4.29 per share, slightly above Wall Street estimates of $4.16 billion and $4.11, respectively.
Higher hard-drive prices lift BofA’s earnings outlook
BofA expects tighter HDD supply to keep supporting Western Digital’s prices and profit margins.
The bank forecasts a 56.4% fiscal first-quarter gross margin, slightly above Western Digital’s own guidance range of 55% to 56%. It expects the benefit from higher pricing to continue into the December quarter, when BofA sees gross margin approaching 59%.
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Western Digital’s latest results have already shown how much margins have expanded. Fiscal fourth-quarter revenue rose 44% to $3.75 billion, and adjusted gross margin reached 54.4%, up sharply from a year earlier.
BofA raised its fiscal 2027 earnings estimate to $22.37 per share from $19.17. The increase helped push the bank’s price target to $800.
The valuation itself actually became more conservative. BofA now applies a 16-times earnings multiple, down from 19 times previously. Higher earnings estimates were large enough to push the target higher, even with the lower multiple.
Part of the slower near-term capacity outlook comes from Western Digital’s transition to newer, higher-capacity drives.
The company’s 40-terabyte ePMR hard drive has qualified with two customers and is entering volume production, according to BofA. The bank expects the product transition to help exabyte shipment growth accelerate during the second half of fiscal 2027.
That marks progress from February, when Western Digital said its 40TB UltraSMR ePMR drive was still undergoing qualification with two hyperscale customers, with volume production planned for the second half of 2026.
Toshiba’s expansion could pressure Western Digital’s pricing
Western Digital and rival Seagate Technology (STX) have recently faced a different concern: whether new industry capacity could weaken the pricing power now supporting their earnings.
The stocks sold off earlier this month after reports that Toshiba planned a major expansion in hard-drive production capacity. Investors worried that additional HDD supply could eventually narrow the gap between customer demand and the drives available to ship.
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BofA’s industry checks have yet to show that pressure.
The bank said pricing discussions with hyperscale customers remain constructive, despite Toshiba’s planned expansion. BofA expects strong HDD pricing and margins to continue well into 2028.
Other analysts have also pushed back on the idea that the current HDD cycle is about to end. Morgan Stanley maintained its Overweight rating on Western Digital this week after the recent sell-off, arguing that demand, customer growth, and pricing remain supportive heading into earnings.
BofA still identifies several ways the call could go wrong. A slowdown in cloud or data-center spending, weaker HDD pricing, delays in Western Digital’s higher-capacity products or market-share losses to Seagate could reduce the earnings growth behind its $800 target.
Western Digital’s fiscal first-quarter results will give investors their next read on the two numbers behind BofA’s call: how quickly the company is shipping more storage capacity and how much customers are paying for each terabyte.
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