Western Digital Stock Cut in Half — Earnings May Be the Key Inflection Point for Valuation Recovery
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Western Digital (WDC) has fallen nearly 50% from its all-time closing high, compressing its P/E from 43× to roughly 15×; Thursday's after-hours earnings will test whether the market's "cycle peak" verdict holds.
Down 50% — what is the market pricing in?
WDC dropped from its June 18 record close to $376.07, a decline of nearly 50%.
The P/E ratio compressed from a peak of 43× to roughly 15×. This means → the market has already priced in a verdict that the storage cycle is topping out.
In plain terms = investors are not paying for today's profits — they are pre-discounting a future downturn.
Are the fundamentals actually deteriorating?
Analysts tracked by FactSet expect adjusted EPS of $4.11 for the September quarter, more than double last year's $1.78.
Revenue is forecast to rise 47% year-over-year to $4.1 billion — the data points in the opposite direction of a "cycle peak."
Morgan Stanley analyst Erik Woodring stated in a Tuesday note: no signs of irrational pricing or capacity expansion; HDD demand is improving, the customer base is widening, and pricing is accelerating.
Why did the Toshiba expansion rumor rattle the market?
Nikkei reported this month that Toshiba plans to double its AI data-center HDD capacity in fiscal 2027; WDC and Seagate shares fell sharply on the news.
This reflects the market's most sensitive nerve in storage: any new supply from a competitor threatens pricing power.
UBS analyst Timothy Arcuri noted that Toshiba struggles to compete at the high-capacity end — but hyperscale cloud customers said they would steer orders to Toshiba wherever possible.
This means → even if Toshiba's product is less competitive, its mere presence gives cloud buyers leverage at the negotiating table.
What should investors watch on earnings day?
Watch #1: Current-quarter (through December) HDD pricing guidance — this directly tests how long the supply shortage can hold.
Watch #2: Management's comments on whether Toshiba supply has materially affected customer negotiations — any concession weakens the bull case for sustained supply–demand imbalance.
Wedbush expects WDC to beat its own guidance and consensus, citing the company's historically conservative guidance and repricing room on non-LTA transactions.
Company guidance: revenue $4.1 billion (±$100 million), gross margin 55%–56%, non-GAAP EPS $3.85–$4.15.
Where do Morgan Stanley and UBS stand?
Morgan Stanley maintains an Overweight rating but cut its target from $676 to $643, while naming Seagate as its "top pick."
This means → MS still believes in the storage cycle but has shifted its preference slightly toward Seagate within the same trade.
In plain terms = it is not a bearish call on WDC — it is a relative-value call that Seagate offers better odds on the same thesis.
市场有风险，内容仅供研究参考，不构成投资建议。