Western Digital (WDC) Stock Forecast: Melius Targets $1,050 After 84% Margin; Short Setup at $570

The $1,050 target set by Melius and the upgrade by Goldman Sachs point to the following. Analysts at Melius Research point out that the market is undervaluing HDDs for AI infrastructure in the long term. AI models have an insatiable appetite for large amounts of structured and unstructured data, including video, audio, image content, and simulation. These massive volumes of unstructured data can be handled efficiently by using large-capacity drives, which offer the most cost-effective storage solution at scale. 

While SSDs continue to gain ground in data centers, the industry still requires high-density storage solutions for data storage. Melius has a bullish view on WDC stock given that the company has a 32TB ePMR nearline HDD in the market and cloud customers account for 89% of its total revenue and exabyte volume is growing above management's guidance of 25% in the long term. The brokerage firm started coverage on WDC stock after seeing the stock pullback by 20% from the highs.

The recent drop is expected to have improved valuation. The analyst consensus target is supported by analyst views from Goldman Sachs, Cantor Fitzgerald, and BofA. Analysts at Goldman Sachs point out that there is a lack of HDD supply, price is holding, and cloud demand in the mid-term will drive the price target. Analysts at Cantor Fitzgerald set its WDC target at $900 due to hyperscaler spending on AI infrastructure in the future to 2028 and 2029. 

Meanwhile, BofA's target reflects expectations that supply constraints and exabyte shipment acceleration will keep price firm. The different targets from analyst firms (ranging from $500 by Susquehanna Neutral rating to $1,050 by Melius Buy rating) reflect the varying expectations regarding how long the demand cycle of AI storage will continue.

The $3.27 EPS and 42% annual revenue will have impact on the multiple. The stock is expected to move after the earnings report on July 29. Analysts expect a wide range of 3.32 to 3.27 EPS and total revenue of around $3.70 billion, above the consensus management expectations of $3.2 billion. The key to focus on in the July 29 earnings release is if the company is set to beat estimates once again, as it has been in recent quarters. The company reported $3.34 billion revenue, 50.5% non-GAAP gross margin, $2.72 earnings per share and $978 million in operating cash flow for the previous quarter. 

Since then the stock is down by 30% as investors profit take, with a broader pullback for semiconductor stocks and semiconductor stocks related to Samsung, according to reports of tipranks. In addition, hedge funds have also been liquidating in storage-related stocks such as Micron and Sandisk. The valuations of WDC have decreased from June highs, but there is more clarity now regarding the upcoming earnings. The positive reports from the July 29 earnings would help improve expectations for the stock price. In contrast, lower-than-expected reports will reinforce the downward trajectory that the stock has recently experienced.

On the H4 Timeframe, WDC has formed a Triple top at $591 to $600 and is selling off this resistance zone within a downtrend channel at the time of writing. Current price is trading at $569.87. Since the last candle formed is a red candle (sell candle), the short pressure continues.

Western Digital (WDC) Stock Price Chart - Source: Tradingview

The Relative Strength Index is at 48.36, indicating neutral territory. If WDC were to close above the $591 to $600 resistance, the current Short Position would need to be re-evaluated. Short Term Support: $536.30. If WDC breaks below the short-term support, we could see it fall towards $481.60.

• Short Entry: Below $536.30 (Support breakdown confirmed)
• Target: $481.60
• Stop Loss: Close above $591.50
• Q4 FY2026 Earnings: July 29 (Consensus EPS $3.27 (+100% YoY), revenue $3.70 billion (+42% YoY)
• Analyst Targets: Melius $1,050, Cantor Fitzgerald $900, BofA $732, Goldman Sachs $650

Melius Research, which initiated coverage of WDC with a Buy rating and $1,050 price target said that the demand for high capacity hard drives will still be fueled by the AI infrastructure as AI generates unstructured data like videos, images, audio, and files from simulations. This unstructured data would still require storage which is why HDDs would continue to be a popular storage medium for Hyperscale storage as HDDs are more cost effective than SSDs.

Additionally, Melius points to Western Digital’s cloud business is still expanding along with the growth of the 32TB Nearline hard drive HDD portfolio and having shipped more Exabyte capacity than management long-term growth target as factors that support WDC’s current investment case. The firm initiated coverage of the stock which was down over 20% from the recent high, calling it a more attractive valuation now that it had dropped.

According to reports, the stock of Western Digital was trading at around $780 on June 22. Two weeks later, it has fallen to $539 as profit taking took place in the stock alongside weakness in the semis sector as well as some of the Samsung sector. 

The broader weakness in the semis stocks, in particular, storage and flash memory caused a selling wave of WDC among institutional investors who reduced positions on WDC together with Micron and SanDisk according to TipRanks. 

Since then, it managed to recover some losses as Goldman Sachs upgraded WDC and sentiment in the broader semis improved.

At the July 29 earnings, we’d expect gross margins at 50.5% last quarter, and revenue at $3.70 billion on guidance. It would be interesting to see the guidance of management in relation to the demand from Hyperscalers in 2028 and 2029. Strong Earnings with positive guidance could lead to a change of the short setup, while weaker than expected results could lead to WDC’s price falling to $481.60.

Western Digital remains in a downtrend below $591 to $600 Triple top Resistance. WDC’s stock continues to face resistance from Triple Top and is selling off near $600 level. Despite the continued hype regarding storage demand being fueled by AI, it could still be a case of too little too late. The next big catalyst event is at WDC’s July 29 earnings where we’d see how the demand from Hyperscaler clients are going in the years 2028 and 2029. A downside breakdown of WDC short term support at $536.30 would lead to the stock falling towards $481.60, if it were to close above $591.50, it invalidates the setup and the price could rise towards the resistance zone of $591.50.