Western Digital (WDC): Assessing Valuation After Analyst Upgrades and Expanded System Integration Lab

Western Digital (WDC) shares have climbed following several analyst upgrades and the company’s announcement of a new System Integration and Test Lab. AI and cloud-driven demand for high-capacity storage is fueling optimism about Western Digital’s growth prospects.

See our latest analysis for Western Digital.

Momentum has been building fast for Western Digital this year, thanks to the ongoing AI-fueled storage boom and a steady pace of positive news. This includes its expanded System Integration and Test Lab and headline-making gains among S&P 500 data storage names. After an impressive 18% share price return over the last month, Western Digital now boasts a year-to-date share price return of 104% and a standout 1-year total shareholder return of 149%, underscoring both strong recent upside and investor confidence in the company’s long-term potential.

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With shares hitting new highs and Wall Street raising price targets, the crucial question is whether Western Digital’s stock is still undervalued, or if the market has already priced in the company’s AI-driven growth story.

Most Popular Narrative: 21.8% Overvalued

Western Digital’s last close at $126.20 sits well above the narrative’s fair value estimate of $103.59 per share. This anchors current optimism but raises important questions about what is driving this premium.

The explosive increase in unstructured data generated by AI applications, Agentic AI, and cloud-based services across industries is driving unprecedented storage needs. Western Digital's deep integration with leading hyperscalers (for example, all top 5 with firm POs/LTAs covering the next 12 and 18 months) positions the company to benefit from secular demand, directly fueling higher long-term revenue growth.

Read the complete narrative.

Want to see what really powers this sky-high valuation? Behind the scenes are ambitious projections for how fast revenue and profits will scale if these technology shifts hold. The math fueling this narrative will surprise even the most seasoned tech investors.

Result: Fair Value of $103.59 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, heavy reliance on just a few cloud customers, along with rapid shifts in storage tech, could quickly challenge the bullish case for Western Digital.

Find out about the key risks to this Western Digital narrative.

Build Your Own Western Digital Narrative

If you see things differently, or want to dive deeper into the data yourself, you can shape your own Western Digital narrative in just a few minutes. Do it your way

A great starting point for your Western Digital research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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