Western Digital’s Investor Day Highlighted Rosy Plans, but We Await Execution; No Change to $70 FVE

We’re maintaining our $70 fair value estimate for Western Digital shares after its 2022 investor day gave us no compelling reason to alter our long-term thesis on the company. We’re pleased to see Western continuing to pursue growth in cloud applications, but we remain highly skeptical of financial targets that we view as lofty. Western wants to raise its growth and margin profiles across both hard disk drives, or HDDs, and NAND flash chips, but we came away from the investor day wanting for more concrete plans in place in order to do so. We were hoping for a more robust response to last week’s Elliott Management letter calling for the company to split in two, but understand Western’s management aiming to be prudent and patient in responding. All in all, we continue to think of Western Digital as a business with strong technology, but that plays into cyclical markets—which informs our no-moat rating. That said, we still think the market is overly discounting its unique combination of flash and HDD businesses, and view shares as undervalued.