Western Digital Is the S&P 500’s No. 1 Stock Today. One Firm Nearly Doubled Its Price Target.

Morgan Stanley and Rosenblatt Securities lifted their price targets for Western Digital on the back of strong hardware demand. (Dreamstime)

Key Points

• Western Digital stock is on pace for an all-time closing high, and is up 44% in September.
• Morgan Stanley nearly doubled its price target for Western Digital to $171, citing surging hardware demand.
• Analysts expect strong demand for hard disk drives through at least 2027 due to cloud and AI spending.

Western Digital was the top performer in the S&P 500 on Monday after multiple Wall Street firms boosted their outlooks for the data-storage company, citing surging hardware demand.

Just weeks after naming Western Digital a “top pick,” Morgan Stanley reiterated an Overweight rating on the stock and nearly doubled its price target to $171 from $99—the highest figure on Wall Street, per FactSet. The market hasn’t fully priced in the uptick in demand for the company’s core products, Morgan Stanley said.

Western Digital stock climbed 7.8% to $115.26 on Monday, putting it on pace for an all-time closing high, according to Dow Jones Market Data. The stock is up 44% in September alone.

Hard disk drive, or HDD, demand has started to pick up over the past year due to growing cloud-infrastructure and artificial-intelligence spending, Morgan Stanley said. That growth cycle is unlikely to peak until at least 2028, the firm said.

“Data is the oil that will keep AI running,” Morgan Stanley’s Erik W. Woodring wrote. “And it’s become increasingly clear that HDD’s are the oligopoly that will benefit from the vast amounts of data storage needed to power AI.”

Western Digital is part of that oligopoly. The company has taken advantage of surging demand and still-tight supply to raise prices, Morgan Stanley noted, and it will likely shift production to higher-capacity drives that have stronger profit margins.

From 2025 to 2028, Western Digital could have annual per-share earnings growth of 37%, the firm estimated, putting it among the top quartile of cloud hardware, semiconductor, and networking names.

In a separate research note on Monday, Kevin Cassidy of Rosenblatt Securities reiterated a Buy rating on Western Digital stock and lifted his price target to $125 from $90 for similar reasons. The volume of new data-center construction has Rosenblatt confident that demand for HDDs will outstrip supply through at least 2027.

Western Digital won’t be the only winner of the HDD boom, both firms said. Morgan Stanley maintained an Overweight rating for competitor Seagate Technology and lifted its price target to $265 from $168, while Rosenblatt reiterated a Buy rating and boosted its target to $250 from $200.

Seagate stock was rising 4.9% to $228.12 on Monday.

“Are we recommending adding to our Overweight positions at these valuations?” Morgan Stanley’s Woodring asked. “In short, yes, and we’d get even more aggressive if we saw either name underperform for reasons we believe to be unwarranted.”

Write to Nate Wolf at nate.wolf@barrons.com