Top Analyst Shares Two Cents on WDC Western Digital Corp (WDC) Amid Toshiba Chip Deal Buzz

Prospective Toshiba Sale and NAND Trends Going Strong Translate to Bullish Path Ahead for WDC


WDC Western Digital Corp (NASDAQ:WDC) nor Toshiba have made confirmation quite yet, but rumors are swirling regarding a pending deal between the two companies, whereby Toshiba would sell WDC its chip unit. In exchange, WDC would drop pending litigation at the International Court of Commerce. According to a report by Asahi Shimbun, the deal could possibly close by the end of the month.

If the news proves to be true, top analyst Vijay Rakesh of Mizuho believes that “this would be positive for the memory markets (MU), NAND and WDC earnings as it keeps NAND IP protected and Capex disciplined,” although stressing that “We have reached out to WDC and have not heard back yet.”

The analyst cites a Reuters report that WDC is offering $17.4 billion for the Toshiba chip unit as part of a consortium, including U.S. private equity firm KKR & Co, the Innovation Network Corp of Japan and Development Bank of Japan. In this scenario, “Toshiba will retain a stake worth ~100B and other Japanese investors making up the other 50B,” notes Rakesh.

Taking a glance from a WDC stance, Rakesh sees the possibility the company “could raise the 150B yen from a convertible debt offering, or ~$1.4B in additional debt. With WDCs ~8% stake, it would bring in an additional ~$260M in EBITDA from Toshiba, based on our Japanese analyst Takeshi Tanaka’s estimates for Toshiba’s Memory EBITDA of ~350B yen (~$3.2B).”

As such, the analyst maintains a Buy rating with a price target of $105.00 representing a near 16% rise over current trading levels.

Vijay Rakesh has a solid TipRanks score with a 70% success rate and a high ranking of #37 out of 4,616 analysts. Rakesh yields 26.8% in his annual returns. When recommending WDC, Rakesh garners 38.3% in average profits on the stock.

TipRanks analytics exhibit WDC as a Strong Buy. Out of 25 analysts polled by TipRanks in the last 3 months, all are bullish on stock at this time. With a return potential of 18%, the stock’s consensus target price stands at $289.04.

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