Morgan Stanley cuts Western Digital target, raises Seagate amid HDD selloff
Investing.com -- Morgan Stanley on Tuesday lowered its price target on Western Digital to $643 from $676, while raising its target on Seagate Technology to $1,200 from $1,187, citing growing uncertainty around competition and AI funding despite strengthening hard disk drive (HDD) fundamentals.
Analysts led by Erik Woodring said the recent selloff has created an attractive buying opportunity, arguing that the market is pricing in an overly pessimistic end to the HDD upcycle. The firm said it would remain "aggressive buyers" of both stocks ahead of quarterly earnings.
Recent industry checks suggest accelerating storage demand, a widening customer base and a potential supply shortfall of roughly 400 exabytes in 2027 and 2028. Morgan Stanley also pointed to spot HDD transactions at prices two to five times contracted levels, suggesting further upside to margins and earnings.
The analysts said HDD manufacturers are at a similar stage of their cycle as memory chipmakers were a year ago, with pricing gains still accelerating and margins well below potential peaks. They argued that current valuations imply an "overly punitive cycle-end," including an 80% collapse in solid-state drive pricing over the coming years.
Morgan Stanley expects both companies to beat September-quarter expectations and deliver stronger-than-anticipated December-quarter guidance, with its earnings forecasts approximately 12% above consensus for Seagate and 10% above for Western Digital.
The firm maintained Overweight ratings on both companies and reinstated Seagate as its top pick in IT hardware, although it sees Western Digital offering the more attractive near-term earnings setup. The revised targets reflect lower valuation multiples amid concerns over industry competition and AI financing rather than deteriorating earnings expectations.
Western Digital shares have fallen roughly 21% over the past month, while Seagate has declined about 25%, amid a broader selloff in the sector driven by concerns over AI spending and the durability of the storage demand cycle.