Given WDC's material operational challenges and valuation discount, Citi put WDC as its top value IT Hardware stock. The results and outlook did not provide surprises other than a $500 million -$600 million unfavorable tax settlement.
The next catalyst for the stock is the company's investor day on May 10. It will be the first time many investors will interact with the company's new CEO and CFO and allow the company to communicate its strategy and financial goals.
Citi's detailed sum of the parts shows WDC is trading near a -50% discount to peers. Citi MAINTAINED ITS BUY RATING with no change to its $75 target price.
Wells Fargo's Overweight and $70 price target on WDC reflects its broad-based product portfolio (Flash and HDDs) to address the positive growth in digital content. The rating reflects WDC's expected strong growth and margin trends in high-cap / nearline enterprise HDDs.
The rating also factored in WDC's de-leverage and belief that its Flash business is highly undervalued relative to replacement costs.
It also reflected WDC's technology positioning of 3D NAND Flash portfolio, high-cap / nearline enterprise HDDs. It saw that WD could improve its execution in enterprise SSDs.
Mizuho saw WDC reported a better March quarter above its updated guide. The June quarter reflected modestly better earnings in line with consensus.
The gross margins will likely improve with better Flash supply, HDD pricing, and mix. WDC noted contamination is entirely behind and reiterated that its 15% cost reduction target in HDD/NAND is intact for June, with a better 2H driven by 20TB ramps and BiCS5 NAND.
Mizuho adjusted estimates and reiterated a Buy and price target of $72. The price target reflected ~40% upside, as NAND drives an improving 2HC22 with better pricing and in-house supply.
Price Action: WDC shares traded higher by 1.71% at $53.49 on the last check Friday.
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