Bank of America on Monday reiterated its confidence in data-storage stocks Western Digital (NASDAQ: WDC) and Seagate Technology (NASDAQ: STX), raising price targets on both companies ahead of their earnings reports this week. The firm lifted its target for Seagate to $700 from $605 and Western Digital to $495 from $415, maintaining Buy ratings on both.
"Hard disk drive supply remains tight as manufacturers are not adding unit capacity and we see this as a structural change," BofA analyst Wamsi Mohan said in a note. "We continue to see demand exceeding supply, and see continued scope for [manufacturers] to raise prices."
The upgrades come as both stocks have seen massive rallies over the past 12 months. Seagate shares have gained 624%, while Western Digital stock has risen 884%. The surge is primarily driven by the explosive growth of artificial intelligence, which requires vast amounts of data for training models and in turn generates more data that needs to be stored. The highly concentrated hard-disk drive market, an oligopoly of Western Digital, Seagate, and Toshiba, allows producers to manage supply and maintain pricing power.
The price target increases suggest BofA sees significant potential for earnings growth. The bank’s analysis projects Seagate could approach earnings of $45 a share in 2028, with Western Digital potentially reaching $33 a share. This upside potential is a key reason BofA argues for a higher valuation on the stocks.
The positive analyst action reinforces the bullish sentiment surrounding the AI-driven demand for data storage. Investors will be closely watching Seagate’s fiscal third-quarter earnings on Tuesday and Western Digital’s report on Thursday to see if the companies’ results and outlooks validate the high expectations.
This article is for informational purposes only and does not constitute investment advice.
