Average price target of $102.15
Of the 31 analysts tracking Western Digital (WDC), 25 have recommended “buys,” and six have recommended “holds.” The stock doesn’t have any “sell” recommendations. Analysts’ 12-month average price target for WDC is $102.15, and their median estimate is $103. WDC is trading at a discount of ~80% to analysts’ median estimate. The low estimate for WDC stock is $55, and the high estimate is $145.
Does this mean WDC’s 27% stock decline in 2018 has made it an attractive buy at current levels? While analyst price targets provide significant upside potential for WDC, they have been wrong before. In July, analysts had a 12-month price target of $115.7 for WDC. The firm was then trading close to $77.
We have seen that while WDC’s revenue growth is likely to be in the low single digits in fiscal 2020 and 2021, its EPS is estimated to rise 15% annually between 2021 and 2023. In fiscal Q4 2018, WDC reported operating expenses of $820 million, which was below the company guidance of $840 million and $850 million.
WDC is also looking to shut down its Kuala Lumpur HDD (hard disk drive) factory this year, which is expected to result in cost savings. WDC’s forward price-to-earnings ratio for 2019 is estimated at 9x and 7.9x for 2020. The PE ratio for peers Seagate (STX) and Micron (MU) stand at 8.6x and 4x, respectively.
Total market opportunity
During WDC’s investor presentation in July 2018, the company stated that it expects the total market opportunity (or TAM) to grow from $78 billion in 2017 to $105 billion by the end of 2021.
While the TAM for HDDs is expected to stay flat at $24 billion, the flash memory market could rise from $54 billion to $81 billion during the period.