Western Digital: The HDD Recovery Is Strong, And The Pullback Restores A Buy Case
Ticker: WDC Latest close: $411.04 on October 6, 2026 Updated rating: Buy, downgraded from Strong Buy
Summary
I am downgrading Western Digital (WDC) from Strong Buy to Buy. The pullback improves the entry point, but the original NAND diversification argument remains broken. It delivered 4Q FY26 revenue of $3.747Bn, up 44% Y/Y, with non-GAAP diluted EPS of $3.56. 1Q FY27 guidance calls for $4.1Bn of revenue and $4.00 of non-GAAP EPS at the midpoint.
The operating thesis is strengthened by nearline HDD demand, pricing, gross margin, operating leverage, and free cash flow all improved sharply. The Flash separation, however, means WDC is now an HDD-only company.
My base valuation is $480 per share using FY27E non-GAAP EPS of $20.10, a 26x forward P/E, and a 9% discount rate. That implies about 17% upside from the latest close.
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Source: Revenue memo
