Western Digital: AI-Driven Demand, Long-Term Pricing Visibility, and Deleveraging Support Top-Pick Buy Rating and $306 Target

Morgan Stanley analyst Erik Woodring has maintained their bullish stance on WDC stock, giving a Buy rating today.

Erik Woodring has given his Buy rating due to a combination of factors that point to both strong current execution and compelling future upside. Western Digital outperformed already high expectations in its latest quarter and raised guidance, with most key operational and financial metrics surpassing his above-consensus forecasts. He highlights that accelerating AI-related workloads at major cloud service providers are driving a sustained increase in storage demand, and as deployments shift from training to inference, this demand should expand further. In addition, a favorable supply-demand backdrop is supporting higher pricing and better unit economics, with increases in price per terabyte and a mix shift toward higher-capacity drives materially lifting his long-term margin and earnings outlook.

Woodring also emphasizes that Western Digital’s pricing visibility now extends well into 2028, with baseline agreements already secured with some large cloud customers and additional upside potential as more contracts for 2027–2028 are finalized. He projects that these pricing tailwinds will largely translate directly into profit, pushing his FY27 gross margin forecast significantly above the Street and driving a roughly 20% increase in his FY27 EPS estimate to about $17. Alongside this, he notes that planned debt-for-equity transactions and expected conversion of outstanding securities should leave the company effectively debt-free, further enhancing equity value. These dynamics underpin his new $306 price target, a notably higher bull-case valuation, and his decision to keep Western Digital as a Top Pick with a Buy recommendation.

In another report released today, TipRanks – xAI also reiterated a Buy rating on the stock with a $316.00 price target.