Western Digital (WDC): Exploring Current Valuation After Fed-Fueled Market Rally and Analyst Upgrades

Western Digital (WDC) made some waves recently, and if you are keeping an eye on the stock, the sudden lift might have you wondering what’s behind it. In this case, the spark wasn’t company-specific, but rather came from Washington, where Fed Chair Jerome Powell’s comments at the Jackson Hole symposium soothed concerns about persistent high interest rates. Investors interpreted the dovish shift as a sign that the era of aggressive rate hikes could be winding down, which sent equities broadly higher and gave Western Digital a nice tailwind in the process.

Over the past year, Western Digital shares have climbed 63%, helped along by episodes like this and supported by steadily improving earnings metrics. In the shorter term, the stock is up 12% in the past month and an eye-catching 49% over the past three months. This pace hints at shifting views on the company’s upside or risk profile. Adding to this momentum are recent analyst upgrades and upward earnings revisions, as well as a completed share buyback, resulting in a company that’s quietly building momentum even as the headlines focus on macroeconomic signals.

But with so much upward movement already in the rearview, the real question is whether Western Digital is trading at a discount to its future potential or if all the optimism is already priced in. Should investors latch on now, or has the train left the station?

Most Popular Narrative: 12.3% Undervalued

According to community narrative, Western Digital is considered undervalued by analysts, with significant future growth drivers tied to AI and hyperscaler demand. The narrative highlights the company's strong position as it responds to rapid changes in data storage needs and the expanding role of cloud-based services.

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 and LTAs covering the next 12 to 18 months) positions the company to benefit from secular demand, directly fueling higher long-term revenue growth.

Want to know what’s guiding this lofty price target? This narrative presents bold projections tied to cutting-edge drive technology and margin expansion that outpace traditional sector valuations. Curious about what underpins this optimistic case and how far analysts think Western Digital can progress as data storage demand grows? Keep reading—the numbers behind this thesis might surprise you.

Result: Fair Value of $87.76 (UNDERVALUED)

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

However, Western Digital’s heavy reliance on a handful of big cloud customers, along with ongoing volatility in global trade policy, could quickly challenge even the most optimistic forecasts.

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

Another View: Discounted Cash Flow Perspective

While analysts build their case on future earnings and sector optimism, the SWS DCF model offers a more stripped-down and fundamentals-based view. Interestingly, it also finds Western Digital's current price below its calculated fair value. Could both methods really be pointing in the same direction, or is the gap between them telling us more about expectations?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Western Digital for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Western Digital Narrative

If you are interested in digging into the numbers or want to build your own case, you can start your own narrative in just minutes. This way, you can do it your way.

A great starting point for your Western Digital research is our analysis highlighting 4 key rewards and 2 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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