After plunging 25%, Western Digital Corporation (WDC.US) received intense bullish sentiment from Wall Street. Can the HDD supercycle pass the test through the financial report?

Note that since June 2026, Western Digital Corporation (WDC.US) has become one of the hottest targets on Wall Street. In just two weeks, several top investment banks have raised their target prices, with ratings generally maintained as "buy" or "hold". At the beginning of July, Western Digital Corporation's forward price-to-earnings ratio soared to over 50 times. During the traditional electronic industry adjustment period entering the third quarter, any slight movement could lead to profit-taking frenzy and trigger a "stampede-style" pullback of over 25% in the short term, such as with Western Digital Corporation. Cantor Fitzgerald significantly raised its target price from $660 to $900 on June 29, maintaining a "hold" rating.The firm believes that the construction of AI infrastructure will drive the semiconductor industry to reach $30 trillion in 2029 and exceed $35 trillion in 2030, with Western Digital Corporation as a core storage supplier poised to benefit deeply. Bank of America Corp analyst Wamsi Mohan raised his target price from $610 to $732 on July 1, maintaining a "buy" rating. Mohan pointed out that HDD industry demand growth continues to outpace supply, creating a strong pricing environment, with management's 25% year-on-year growth guidance likely to be exceeded. Melius Research analyst Ben Reitzes initiated coverage of Western Digital Corporation on June 29 with a "buy" rating and set the highest target price on Wall Street at $1050, indicating about 55% upside. Reitzes stated, "The company's stock has fallen over 20% from its recent high, providing an opportunity for long-term AI infrastructure bulls to enter the market." Morgan Stanley analyst Erik Woodring raised his target price from $488 to $650 in mid-June, maintaining a "hold" rating, and gave an upside target of $920. JPMorgan raised its target price from $530 to $650, while Mizuho Securities raised its target from $550 to $685, both maintaining a "hold" rating. Supply-demand imbalance as core logic: HDD entering a "super cycle" The core DRIVE of this round of intensive investment bank upgrades has shifted from a simple demand story to specific supply shortage logic. A Morgan Stanley report pointed out that the current HDD market is facing a severe supply-demand imbalance: on the demand side driven by AI workloads, the annual growth rate is as high as 40% to 50%, with approximately 80% of data storage for hyper-scale cloud service providers on HDDs; on the supply side, the annual growth rate is only 30% to 35%, with a supply gap reaching 10% to 15% of demand by 2026, and ODM manufacturers holding only 1 to 2 weeks of inventory. Western Digital Corporation's CFO Kris Sennesael stated at the Evercore Global TMT Conference on June 3, "We are highly confident that in the next 3 to 5 years, zettabyte growth will exceed 25%." The company can meet this growth without adding capacity, as higher capacity hard drives (32TB to 40TB ePMR, 44TB HAMR) will drive most of the growth. Capital expenditures can be kept at 4% to 6% of revenue, with a nearly 30% free cash flow profit margin. More importantly, Sennesael revealed that the company's incremental gross margin is as high as 70% to 75%, thanks to rising unit prices per terabyte while costs are declining. Currently, both companies sell for approximately $14 to $15 per TB, with plans to increase to $25 to $30 per TB by 2027 to 2028. Market consensus and outlook Despite some differences, the overall Wall Street consensus remains optimistic. According to MarketBeat data, in the past 90 days, the stock has received 3 upgrades and only 2 downgrades. Of the 24 analysts covering the stock, 18 gave a "buy" rating, 2 gave a "strong buy" rating, only 4 gave a "hold" rating, and there were no "sell" ratings, with a consensus rating of "moderate buy". Western Digital Corporation will announce its fourth-quarter fiscal year 2026 earnings on July 29, with the shipment volume of 40TB ePMR products and gross margin guidance being key to verifying the bullish logic. If the gross margin remains above 50% and high-capacity products ship as planned, it will strongly support the high target price expectations; conversely, if product certifications are delayed or capital expenditures from cloud service providers slow down, it could trigger a new round of valuation adjustments. In the era of explosive AI data growth, as one of the two HDD oligopolies, Western Digital Corporation is in a possible "super cycle" that could last for several years. Analysts point out that the differentiation in July is not the end of the AI storage wave, but a healthy valuation cooling-off. Bulls on Wall Street are waiting for the actual shipment volumes and financial performance of the major manufacturers in the third quarter. If companies like Western Digital Corporation can withstand this round of industry fluctuations under long-term agreements (LTA) and maintain net profit margins, the July adjustments are likely to become a "golden pit" for reallocating funds during the storage feast in the second half of the year.