Citi Analysis has begun analysis protection on each Western Digital (NASDAQ:) and Seagate (STX) with Purchase scores, citing expectations of “a cyclical restoration within the storage market.”
“Following a number of quarters of storage digestion, capex cuts and workforce reductions, we anticipate the storage media trade dynamics to enhance from right here with the return of pent-up storage demand led by hyperscalers,” analysts mentioned in a be aware.
WDC and STX shares rose 1.4% and 0.15% in premarket buying and selling, respectively.
Citi initiatives complete revenues for the storage media trade to develop at roughly 25% compound annual development charge (CAGR) over the following three years, largely fueled by complete petabyte (PB) development of round 30% CAGR.
As well as, enterprise information is projected to develop at over 40% CAGR as AI continues to drive information creation, storage, and administration, analysts famous.
Giving it a 12-month goal value of $110, the analysts are bullish on STX prospects amid a sustained HDD cyclical restoration fueled by enterprise and hyperscalers, together with AI-driven storage demand development, rational capability additions, and HAMR-led price enhancements.
For WDC, with a $90 goal value, Citi mentioned its constructive view relies on a broader restoration within the storage market, together with the corporate’s publicity to each HDD and SSD, improved margins in a constrained flash trade, and the potential spin-off of its flash enterprise primarily based on a sum-of-the-parts evaluation “which we imagine is prone to unlock worth primarily based on a SOTP evaluation,” analysts wrote.
Potential dangers to these views embody macro elements, as demand pressures from hyperscalers (60+% of storage capability) might result in a provide glut, inflicting elevated pricing volatility and margin erosion, concluded Citi.
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