Western Digital (NASDAQ:WDC) saw its stock rise 3.4% in premarket trading on Wednesday after Morgan Stanley upgraded it to a Top Pick, citing confidence in the company’s technology roadmap and capital return strategy.
“Following management meetings, we gained increased confidence in WDC’s tech roadmap, and walk away more confident that WDC’s 20%+ valuation discount vs. peers is unwarranted,” the analysts at Morgan Stanley wrote. The firm raised its price target to $99 from $92.
Morgan Stanley emphasized that hard-disk drives (HDDs) remain the most attractive segment within its hardware coverage. “Despite significant stock outperformance vs. the rest of our group, HDD’s remain the most attractive short-and-longer-term investment opportunity in our Hardware coverage,” the note added.
The analysts highlighted Western Digital’s progress with energy-assisted magnetic recording (ePMR) and UltraSMR products, capable of storing up to 36 terabytes. “The single most important data point illustrating that CSPs are comfortable with WDC’s technology roadmap remains — WDC has demand visibility through a combination of firm purchase orders and LTA’s from their largest customers into C2H26,” the report stated.
Morgan Stanley also underscored capital allocation priorities. “Buybacks are the name of the game as WDC trades at a >20% discount to peers, and our meetings with management last week confirm WDC is materially ramping buybacks in F2Q26 and beyond,” the analysts said, noting that dividends are likely to follow.
The report further highlighted growing investor interest in Western Digital and a larger potential upside compared with Seagate Technology, which previously held the Top Pick rating.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.