BMO Capital lowered 12-month price target to $85
A few days back, BMO Capital Markets analyst Tim Long downgraded the rating on Western Digital (WDC) stock to “market perform” from “outperform.” Long expects WDC stock to be range-bound in the short term and lowered the 12-month price target on the stock to $85 from $120. WDC is currently trading at $80.62.
Although Long believes the fundamentals of WDC stock to be solid, a flash storage demand-supply balance is expected to limit the potential improvement in profit margins and revenue growth for the firm. Analysts have estimated a YoY (year-over-year) rise in WDC’s shipments for 2018 driven by strong demand and increased capacity. However, Long is expecting a fall in average selling prices (or ASP), which could negatively impact gross margins and revenue in 2019.
Long stated, “Given the cyclical nature of the memory industry, we believe valuation will remain depressed on the expected slower growth and lower gross margins.” BMO Capital has projected a 7% YoY decline for HDD (hard disk drive) shipments in 2019. HDD accounts for approximately 50% of total revenue for WDC.
Bank of America reiterates buy rating on the stock
Bank of America (BAC) Merrill Lynch analyst Wamsi Mohan reiterated a buy rating in WDC with a 12-month price target of $120. Mohan is optimistic that the joint venture between Japan’s (EWJ) Toshiba and WDC will reduce supply uncertainty, and investments in a new fab will benefit the latter in the long run.