Western Digital: Buy Rating on Margin Expansion, HAMR Technology Progress, and Long-Term Cloud Demand Visibility

Analyst Krish Sankar from TD Cowen maintained a Buy rating on Western Digital and increased the price target to $325.00 from $200.00.

Krish Sankar has given his Buy rating due to a combination of factors tied to Western Digital’s execution, profitability outlook, and strategic positioning. He highlights that the company is demonstrating strong operational performance, with management guiding to substantial gross margin improvement and earnings growth over the next several years. While near‑term incremental profitability may look less aggressive than a key peer’s due to a heavier tilt toward exabyte-driven volume growth, he views this as a temporary effect within a broader trajectory toward roughly 60% gross margins by the end of 2027. Based on his earnings forecasts, he sets a $325 price target, applying a valuation multiple that reflects confidence in Western Digital’s ability to deliver the modeled EPS expansion.

In addition, Sankar underscores Western Digital’s technological progress in HAMR drives as an important medium-term catalyst. Despite a shorter development history than its main competitor, the firm appears only modestly behind in timing and is already in the process of qualifying HAMR with multiple large cloud customers, supported by proprietary laser IP that could enhance product efficiency and cost structure. He also points to strong demand visibility via long-term agreements that lock in volume and pricing with major customers out through 2028, which supports both revenue predictability and margin improvement. While he notes that a slowdown in AI-related datacenter investment is a key risk, Sankar believes the combination of execution, technology roadmap, and contracted demand justifies a Buy rating on the stock.

Sankar covers the Technology sector, focusing on stocks such as Micron, KLA, and Apple. According to TipRanks, Sankar has an average return of 36.3% and a 65.78% success rate on recommended stocks.

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