Key Stats for Western Digital Stock
- This-Week Performance: -20%
- 52-Week Range: $73 to $800
- Valuation Model Target Price: Around $650
- Implied Upside: About 50%
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What Happened?
Western Digital Corporation stock fell about 20% this week, finishing near $434 per share, even after delivering better-than-expected fiscal fourth-quarter results. Shares had risen sharply before earnings, leaving an unusually high bar for the report as investors questioned how much future AI-storage growth was already reflected in the stock.
Western Digital stock fell specifically because its 22% exabyte shipment growth and 55% to 56% fiscal Q1 gross-margin outlook failed to clear investors’ elevated expectations, particularly compared with rival Seagate Technology’s stronger near-term margin outlook. Western Digital shipped 231 exabytes, a measure of the storage capacity delivered to customers, while management continues to expect demand growth above 25% over the longer term. Analysts on the earnings call highlighted that WDC’s margin outlook was roughly 200 basis points below its main competitor’s, while Seagate was targeting gross margins above 57%. Toshiba also competes with Western Digital in enterprise hard drives, but Seagate remains the clearest profitability benchmark for the current debate.
This week, Western Digital reported fiscal Q4 revenue of $3.75 billion, up 44% year over year, EPS of $3.56, gross margin of 54.4%, and free cash flow of $1.3 billion. Management guided fiscal Q1 revenue to about $4.1 billion, gross margin to 55% to 56%, and EPS to about $4.00. CEO Irving Tan said, “Data creation isn’t slowing, it’s accelerating,” as Western Digital ramps 40-terabyte ePMR drives, which let cloud customers store more data on each drive, while preparing 44-terabyte HAMR products for the first half of 2027 and discussing long-term customer agreements extending into 2031.
The earnings reaction therefore looks more like an expectations reset than a breakdown in storage demand. Cloud revenue reached $3.3 billion, or 89% of quarterly sales, up 43% year over year, while the blended price increase per terabyte improved from high single digits in the previous quarter to the high teens. Summit Insights also downgraded Western Digital from Buy to Hold following the results, adding to concerns that the storage recovery and margin expansion may already be well advanced. The next leg higher depends less on proving that AI needs storage and more on whether WDC can translate stronger pricing, higher-capacity drives, and lower cost per terabyte into faster capacity growth and durable earnings through the rest of 2026.
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Is Western Digital Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): around 32%
- Operating Margins: around 40%
- Exit P/E Multiple: around 17x
The 32% revenue-growth assumption is bullish, but it broadly reflects the steep expansion embedded in current analyst estimates. Reaching that level requires hyperscale cloud customers to keep adding storage rapidly as AI inference, Agentic AI, and other data-heavy workloads continuously generate information that must be retained, so this is better viewed as an upside scenario than a conservative base case.
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The 40% operating-margin assumption is more restrained than the later profitability implied by current consensus estimates. Western Digital already delivered a 37.3% operating margin for fiscal 2026 and 44.2% in fiscal Q4, while the EBIT chart shows analysts expecting substantial further profit growth. That forecast path is aggressive, but using a 40% margin in the valuation model avoids relying on the full margin expansion implied by consensus.
The 17x exit P/E is also relatively restrained compared with the roughly 21x five-year historical multiple shown in TIKR. This means the valuation case depends more on Western Digital delivering earnings growth than on investors paying a progressively richer valuation.
Over the next 12 months, the biggest operating lever is the ramp of 40-terabyte ePMR drives, which pack more storage onto each physical drive and can lower cost per terabyte. Management expects the platform to represent more than 50% of nearline exabytes by fiscal Q3 2027, while contract repricing and preparations for 44-terabyte HAMR drives provide additional opportunities to increase storage density and improve economics.
Based on these assumptions, TIKR’s model estimates a target price of around $650. The model image was generated using a share price near $452, where it implied about 44% upside, while the same target represents about 50% upside from the more recent price near $434. Western Digital therefore appears undervalued under this bullish growth scenario, but reaching that value depends on higher-capacity products, pricing power, and AI-driven storage demand translating into sustained revenue and margin growth.
How Much Upside Does WDC Stock Have From Here?
Investors can estimate Western Digital Corporation’s potential share price, or what any stock could be worth, in under a minute using TIKR’s New Valuation Model tool.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
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