Goldman Sachs Cuts Western Digital Price Target to $540 as HDD Capacity Expansion Concerns Weigh on Valuation
nashnova research
Western Digital posted a blowout quarter, but Goldman Sachs still cut its target from $615 to $540, arguing that a rival — likely Toshiba — may expand HDD capacity, capping the sector's valuation multiple for the long term.
The numbers are great — so why did Goldman cut?
Last quarter's revenue hit $4.381 billion, up 55.5% year-on-year and roughly 5% above Wall Street consensus. Non-GAAP EPS came in at $4.64, beating estimates by about 12%.
Next-quarter guidance is even stronger: revenue midpoint of $5.1 billion, about 11% above consensus; EPS guidance of $5.80, roughly 21% above expectations.
Yet Goldman slashed the valuation multiple from 22× to 18× P/E, dropping the target from $615 to $540. This means → Goldman sees rising industry risk that outweighs the near-term earnings beat — the stock doesn't deserve the old multiple.
What exactly is the worry?
On the earnings call, Western Digital's management obliquely acknowledged that a competitor may be expanding capacity. Goldman believes that competitor is most likely Toshiba.
In plain terms = the HDD industry's profits over the past two years rest on one thing: everyone agreed not to add capacity, so supply discipline pushed up prices and margins. If someone breaks that pact, the premium logic unravels.
This reflects Goldman's core tension: near-term earnings are strong, but long-term pricing power faces dilution risk. That is the key reason for holding at "Neutral" rather than upgrading.
Why does Goldman prefer Seagate?
Goldman reiterated a "Buy" on Seagate, citing smoother progress on HAMR — heat-assisted magnetic recording, a next-generation technology that uses a laser to heat the disk surface so data can be written at higher density.
Western Digital's HAMR timeline: qualification with two customers expected in Q1 2027, with shipments beginning in the first half of the year. This means → HAMR is not contributing revenue yet, and the roadmap remains unproven.
Put simply = both companies make hard drives, but Seagate is further along on the technology transition. Goldman believes that translates into stronger pricing power.
Capex is rising — what's the goal?
Near-term capital spending will run above the company's long-term 4%–6% target range, focused on magnetic heads, media, and factory automation.
This means → Western Digital is spending more to bring critical component production in-house, reducing reliance on outside suppliers.
The 40TB ePMR product is ramping: expected to reach 30% of nearline shipments next quarter and roughly 50% the quarter after. Data storage capacity grew 22% year-on-year, and management reiterated a long-term 25% annual growth target.
What to watch next?
Seven key customers have extended demand forecasts to 2030 and beyond, giving strong near-term visibility.
But Goldman warns: if Toshiba or other rivals launch a larger-scale expansion, the supply-demand premium underpinning the sector's valuation will face structural pressure.
Two critical checkpoints ahead: ① whether HAMR ships on schedule in the first half of 2027; ② how much capacity competitors actually add. The answers will determine whether HDD valuations re-expand or stay compressed.
市场有风险，内容仅供研究参考，不构成投资建议。