BofA raises Seagate, Western Digital targets on resilient pricing dynamics

Investing.com -- Bank of America raised its price objectives on Seagate and Western Digital, citing stronger-than-expected hard disk drive (HDD) pricing and improved profitability outlooks.

“We recently raised our C25 HDD EB shipment forecast to 1.6 petabytes (PB) … and now raise our STX&WDC estimates further as resilient pricing in the HDD industry indicate further upside to EPS estimates,” BofA analysts wrote.

Western Digital has already announced price hikes across its HDD portfolio, while Seagate reported higher average revenue per terabyte during its June quarter.

BofA noted that although HDD pricing has historically been in secular decline, “demand from AI and limited supply of EBs will be somewhat supportive to prices through C28.”

The bank reiterated Buy ratings on both stocks, highlighting “secular demand from Cloud, rev&margin improvement and path to higher capacity HAMR HDDs” for Seagate, and “secular growth of HDD market and continued GM upside” for Western Digital.

According to BofA’s analysis, both companies could ship more than 1.2PB in 2028 without increasing unit volumes.

“Our scenario analysis suggests that both companies can see as much as 20% upside to EPS for every 2% increase … in the 3-year $/TB decline CAGR,” the analysts said.

BofA raised its price objective for Seagate to $255 from $215, and for Western Digital to $141 from $123.

The bank also increased gross margin estimates for both firms through fiscal 2028, reflecting “increased confidence in improved profitability given the more favorable pricing environment.”

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