Evercore ISI Group analyst Amit Daryanani has deemed Western Digital Corp (WDC) as a standout performer with an Outperform rating and a price target of $80.

Some investors view the company as overly intricate, but Daryanani anticipates a simplification of its narrative in the coming quarters as Western Digital undertakes a strategic split into two distinct entities.

Analysts estimate the separated assets are collectively valued between $80-85. However, Daryanani cautions that there may be lingering costs that impact this figure as plans solidify.

The company is expected to capitalize on a cyclical rebound in hard disk drives (HDD) as demand for exabytes surges by over 30% in the near future. Moreover, a significant recovery in NAND is on the horizon as capital expenditure in the sector has plummeted by more than 75% from its peak.

Forecasts indicate a substantial improvement in gross margins, with HDD margins potentially reaching 33% and NAND margins exceeding 33% by the end of fiscal 2025. Improved pricing and utilization rates are expected to fuel this growth.

Over the next half-year, as clarity emerges regarding the split and operational strategies, Western Digital is poised to unlock hidden value and bolster its stock price.

Investors may be underestimating the company’s ability to reduce debt before the split, leading to a more robust capital return program than anticipated.

Despite a 91% increase in the past year, the potential upside for Western Digital remains strong. Exposure to the stock can be gained through IShares Future Cloud 5G And Tech ETF (IDAT) and Columbia ETF Trust I Columbia Seligman Semiconductor And Technology ETF (SEMI).

Also Read:Micron, Seagate, Western Digital Poised for Upswing, Driven by NAND Price Surge, Analyst Forecasts

Price Actions: WDC shares dipped 1.17% to $67.36 at the last market close on Wednesday.