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A Little-Known Tech Stock Just Experienced a Major Rally


Key Points
Western Digital Corporation shares have been making a comeback after a prolonged decline.
Shares have increased by nearly 50% this year, driven by improving demand for their core products.
Investors should take notice of this positive momentum in the company.
Five stocks that are more favorable than Micron Technology have been identified.
Yesterday, Western Digital Corp (NASDAQ: WDC) saw a 7% increase in its stock price, pushing it to its highest level in over a year. This surge is part of a rally that began in the first week of the year and has resulted in an overall increase of 50% or more. The company, which specializes in data storage solutions such as hard disk and solid-state drives, has seen particularly strong performance since May, suggesting that it is entering a new phase of growth.
Despite the impressive performance this year, many readers may not be familiar with Western Digital. The company, headquartered in San Jose with a market cap of $14 billion, is known for its products that efficiently and securely store and manage digital information. These products are used in computers, data centers, and consumer electronics. Micron Technology Inc (NASDAQ: MU), a competing company based in Idaho, is more well-known in this industry. However, Western Digital’s under-the-radar status bodes well for investors who are now paying attention to the company’s recent success.
Optimistic Outlook
Recently, Exane BNP Paribas upgraded its rating on Western Digital stock from Neutral to Outperform. The research team cited increasing market demand for the company’s NAND and HDD memory products, which have been recovering since earlier this year. They also raised their earnings estimates for Western Digital for next year, demonstrating their positive sentiment towards the company.
This upgrade is in line with Morgan Stanley’s reaffirmation of their Overweight rating on Western Digital shares at the end of last month. Both Exane BNP Paribas and Morgan Stanley recognize the strong demand for Western Digital’s NAND business and believe that the stock is undervalued. Morgan Stanley has set a price target of $52, indicating a potential upside of 20% from the stock’s trading price on Thursday. If the stock reaches this target, it could fully reverse the selloff experienced in 2021 when the stock declined by over 60%. To regain investor confidence and reach its previous triple-digit trading levels, Western Digital needs to reverse the downward trend in its revenue. The company has been experiencing consistent revenue decline since October 2021, and its earnings per share have also turned negative in recent times. Therefore, the upcoming earnings report will be closely watched by investors to assess the impact of rising demand and determine the company’s future trajectory. Any indication of weaker demand than anticipated could lead to a decline in the stock price.
Getting Involved
While Western Digital is currently on a path to recovery, it is essential to remember that investing in turnaround stories can yield significant rewards. With market conditions favoring the company and analysts expressing optimism, it is reasonable to believe that this rally will continue. Comparing Western Digital’s performance to its well-known competitor Micron, Western Digital’s stock has dropped by 40% from its 2021 high, while Micron’s has dropped by 20%. However, in 2023 alone, Western Digital’s stock has increased by 45% compared to Micron’s 37%. This suggests that Western Digital still has room for growth and presents a promising opportunity for investors looking to benefit from the company’s recovery. The upcoming earnings report will likely provide further momentum for this rally. MarketBeat, a trusted source for financial information, offers daily updates on top-rated and best-performing research analysts and the stocks they recommend. While Micron Technology does not appear among the recommended stocks, MarketBeat has identified five stocks that analysts believe are better investments. To view these stocks, click the link below. Additionally, MarketBeat provides a free report on seven stocks with promising long-term outlooks. To access this report, click here.

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