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Western Digital Corporation (NASDAQ:WDC) was added to Wells Fargo’s Q3 2024 Tactical Ideas list on Monday as the data storage company prepares to separate its HDD and Flash businesses into two publicly traded businesses.
“WD is on track toward the separation of the Flash HDD businesses into two independent publicly traded companies by CYE,” said Wells Fargo equity analyst Aaron Rakers, in a note. “Ahead of the separation, following the finalized filing of a Form 10 with the SEC, WD will host an Analyst Day, which we expect to be a positive catalyst as the company will likely provide details on both companies’ independent operating models; planned capital/asset structure.”
Western Digital announced the spinoff plan last October, and said it expects the deal to finalize sometime during the second half of 2024.
“We are increasingly confident in WD’s ability to drive HDD GM% back to its long-term 35%+ range with the potential to exceed this for 4-6 quarters as a nearline recovery accelerates and the industry focuses on ROI w/ hyperscalers accepting reasonable nearline price increases,” Rakers added.
“While both Western Digital’s businesses will have the strategic focus and resources to pursue exciting opportunities in their respective markets once the separation is complete, the Flash business offers exciting possibilities with market growth potential and the emerging development of disruptive, new memory technologies,” said David Goeckeler, CEO of Western Digital.
Western Digital competitor Seagate Technologies (STX) has started to gain traction with its Heat-Assisted Magnetic Recording based nearline HDDs, Wells Fargo noted.
Wells Fargo assigned Western Digital an Overweight rating with a price target of $95.