Western Digital: Long-Term Capacity Contracts and High-Density Drive Mix Shift Support Buy Rating

Analyst Asiya Merchant of Citi maintained a Buy rating on Western Digital, boosting the price target to $325.00.

Asiya Merchant has given his Buy rating due to a combination of factors tied to Western Digital’s improving long-term demand visibility and strategic product mix. He highlights that the company has secured multi‑year long‑term agreements for 2026–2028 with key customers, which lock in baseline volumes and pricing and reflect the value customers place on assured supply as data workloads expand. These agreements are structured around exabyte demand rather than specific technologies, indicating that customers are primarily focused on guaranteed capacity to support rising AI and data‑driven applications. The mid‑20% growth implied by these contracts sits comfortably within industry expectations and suggests a solid underpinning for Western Digital’s longer‑term revenue trajectory.
At the same time, Merchant points to Western Digital’s ongoing transition toward higher‑capacity hard drives, such as 26TB CMR and 32TB SMR products, as a major driver of operating leverage. Management is meeting demand growth by increasing areal density and shifting capacity mix, rather than expanding unit manufacturing capacity, which should support better cost efficiency and margin expansion over time. The strong ramp in shipments of these advanced drives underscores customer adoption and provides a path to both top‑line growth and profitability improvement. Taken together, the visibility provided by the long‑term contracts and the structural benefits from the mix shift to larger drives underpin Merchant’s positive stance on the stock.

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

Based on the recent corporate insider activity of 103 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of WDC in relation to earlier this year.