Demand for data storage keeps growing worldwide. At the center of data storage hardware is Western Digital Corporation (NASDAQ: WDC) and Seagate Technology (NASDAQ: STX). Since Seagate already rebounded, value investors should watch Western Digital now, especially after its settlement with Toshiba.
On Dec. 12, Western Digital finally settled its ongoing litigation and arbitration. The two companies will invest jointly in Fab 6. WDC will participate in the flash wafer fab developments. By ending and resolving all disputes, the overhang on the stock ends. But WDC stock is still well-below its $95.00 a share peak reached in July. Trading at a 6.6x P/E and a PEG of below 0.7 times, the stock has plenty of value. Analysts have a $117.00 target price, which implies upside of nearly 50%.
New Challenges
With the distractions ending, WDC management may now resume its focus on the business priorities. Samsung is taking market share and much of the profits in the storage space. Thanks to favorable NAND pricing, Samsung’s profits are soaring. Western Digital acquired SanDisk to gain exposure and grow in the flash storage space. Earnings will grow at over 30% this year, but fall next year. WDC needs to take back market share from Samsung, squeeze more profits from its mechanical hard drive market, and benefit mutually with the deal it has with Toshiba.
