The AI stock giant has been one of the biggest wealth creators for investors in recent times. Recently, Evercore opined that Western Digital (WDC), a storage company, has been “underrated” by investors. Even in that scenario, WDC stock has soared 895.6% over the past 52 weeks. The ferocity of the rally from undervalued levels says a lot about the pace of AI infrastructure development.
At the same time, the rally is not based solely on excitement or euphoria. Western Digital has reported strong revenue growth, operating margin expansion and increased cash flow. Additionally, with innovation, the company’s product roadmap is likely to ensure that positive momentum is maintained.
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As Western Digital grows and grows, the company has added former Nvidia (NVDA) and Microsoft (MSFT) executive Manuvir Das to its board of directors. Western Digital believes the company can leverage Das’ expertise in terms of driving innovation and operationalizing AI at scale. As Western Digital positions itself for multi-year growth, the addition to the board will likely prove invaluable.
About Western Digital Stock
Headquartered in San Jose, Western Digital is a developer, manufacturer and supplier of hard drive-based data storage devices and solutions. In February 2025, the company completed the commercial separation of the HDD and flash business units. Sandisk Corporation (SNDK) was listed separately as a flash business entity. In addition to unlocking value, this business separation allows Western Digital to pursue sharp innovation and production development.
Western Digital’s end market primarily consists of cloud, customer (OEM and channel customers), and consumer. The company serves this market through the Western Digital and WD brands.
With innovation as a driving factor, the company has 4,500 active patents. It is worth noting that by 2026, Western Digital is focused on high-volume production of HAMR devices in the 36 to 44 TB range. Additionally, Western Digital is targeting HAMR devices in the 80 to 100 TB range by the end of the decade. The roadmap is likely to ensure Western Digital maintains or gains market share. Amid these positives, price action remains bullish and WDC stock has gained 219% over the past six months.
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Solid growth momentum
For Q3FY26, Western Digital reported 45% year-over-year (YOY) revenue growth to $3.34 billion. Additionally, the company reported an operating margin of 35.7%, up 260 basis points from the prior year. Another major highlight of the quarter was free cash flow of $978 million. Considering the growth trajectory, Western Digital is positioned for FCF of over $4.5 billion by FY27.
From a growth perspective, 80% of storage within the cloud is based on hard drives. Therefore, these devices form the basis of AI and cloud data storage. Consequently, revenue and cash flow visibility is strong. Notably, during the third quarter, the company reduced debt and improved its net cash position. So, as credit metrics improve, Western Digital is positioned to increase shareholder returns.
What Are Analysts Saying About WDC Stock?
According to 25 analysts with coverage, WDC stock has a consensus rating of “Strong Buy.” While 21 analysts have a “Strong Buy” rating on WDC stock, one has a “Moderate Buy” rating and three have a “Hold” rating.
The average price target of $512.27 represents a 3.35% drop from current levels. However, the more bullish price target of $660 suggests that WDC could rise 24.53% from here.
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Final opinions
For FY26 and FY27, analysts expected Western Digital to deliver earnings growth of 111.26% and 74.61%, respectively. In fact, Western Digital is “sold out for calendar 2026 and has been signing long-term deals for calendar 2027.” In addition to solid growth, Western Digital is positioned to generate free operating cash flow of $2.8 billion and $3.8 billion for FY27 and FY27, respectively.
Therefore, a forward P/E ratio of 55.45 times does not indicate inflated valuations with P/E/Growth ratio below 1. As the company continues its innovation-driven roadmap, strong growth is likely to sustain beyond 2027. The positive outlook beyond FY27 is supported by industry structural tailwinds. Overall, even after stellar performances over the past 52 weeks, WDC stock looks attractive.
On the date of publication, Faisal Humayun Khan had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
