Lazard Boosts PT on Western Digital (WDC) to $68; Sees Bottoming in HDD

May 21, 2013 6:59 AM EDT
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Lazard Capital is raising its price target on Western Digital (Nasdaq: WDC) from $58 to $68, while maintaining a Buy rating on the name.

Analyst Ed Parker said his firm feels that the HDD market has bottomed and that constructive trends continue. He said that Western Digital "remains at the low end of the upwardly revised model provided last September. The pricing environment continues to be benign. Volume improvements remain the most elusive positive catalyst, but margins should be able to skew upwards even if unit volume doesn't improve meaningfully."

Key drivers include cost cuts, 500-GB and 1-TB platter aerial density improvements, and growth in its higher-margins product areas.

On pressure from Toshiba, Parker believes the risk in manageable since "Toshiba's cost structure isn't as leverageable as [Western Digital's] or [Seagate's (Nasdaq: STX)] given the higher reliance on a third-party supply chain."

Investor focus should now transition from TAM to exabyte capacity shipped. Parker comments, "While visibility into "true" capacity demand is being obscured by the transition of storage from PCs to distributed NAND/SSD capacity as well as the cloud, data requirements continue to grow while aerial density improvements have been slowing."

Shares of Western Digital are flat in early trading Tuesday.

For an analyst ratings summary and ratings history on Western Digital Corp. click here. For more ratings news on Western Digital Corp. click here.

Shares of Western Digital Corp. closed at $59.45 yesterday.

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