RBC Capital analyst, Amit Daryanani, believes the fully combined WDC (NYSE: WDC) could have earnings generating power of >$10.00 in 2017/2018 time frame. There are several positives that could arise out of having – HDD, NAND and some level of DRAM (SNDK/Hynix relationship) under one umbrella and he laid out the bull and bear cases:

Bull Case:

1) NAND Narrative: For the past few years, the consistent bear argument on WDC/STX has been that SSDs will eventually displace the entire HDD market. Acquisition of SNDK allows WDC to squash that narrative, as WDC will be able to invest in both technologies in tandem.

2) WDC has a growing $1.0B+ SSD portfolio that they can shift towards captive NAND supply and either upside to synergies or accelerate their ongoing growth rates.

3) Financial Synergies: Many investors think SNDK's challenges are around execution/operations, WDC is one of the best operators in the industry and could unleash material EPS upside.

Bear Case:

1) China's Ministry of Commerce (MOFCOM) could could hinder the integration speed. WDC recently received approval for HGST.

2)Unexpected increases in CapEx: Given the high cost of transition for 3D NAND we think there is material risk that CapEx requirements could spike.

3) 3D NAND leadership: While SNDK has the lead in planar NAND, its unclear where they stand in 3D NAND.

If WDC could achieve 10-11x FTM P/E along with these earnings estimates, it would imply the stock should comfortably trade >$100 over the next 2-years, a 50% return on today's share price of $66.

No change to his Outperform rating or $94 price target based on a ~13x FY16 earnings..

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Shares of Western Digital Corp. closed at $67.16 yesterday.