Western Digital (WDC) stock has pulled back rather significantly amid a broader artificial intelligence (AI) rout in recent months, but the options market believes some recovery is likely after the earnings event on Oct. 22. Consensus is for the data storage giant to record $3.99 in earnings per share (EPS) for its fiscal Q1, which would represent a whopping 143% growth on a year-over-year basis.
Despite recent declines, Western Digital shares are currently trading at nearly 2x their price at the start of this year.
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www.barchart.comOptions Sentiment Is Bullish for Western Digital Stock
In the derivatives market, a put-to-call ratio of less than 1.00x is typically characterized as in favor of the bulls. That metric for WDC options contracts expiring Oct. 30 currently sits at 0.30x.
This means that traders are increasingly betting that Western Digital stock will rip higher from current levels on the back of its upcoming quarterly print.
In fact, the upper price on those contracts, according to the latest data from Barchart, sits at about $415 currently, indicating potential for another 9.69% rally through the remainder of this month.
WDC also pays a small dividend yield of 0.16%, which makes it even more attractive as a long-term holding.
Morgan Stanley Sees Massive Upside in WDC Shares
Despite its huge year-to-date run, Morgan Stanley analyst Erik Woodring believes Western Digital stock is undervalued at current levels and is poised for continued gains into 2027.
In a research note this week, Woodring maintained the Nasdaq-listed firm at “Overweight,” with his downwardly revised $643 price target indicating potential for a nearly 70% rally from here.
“We see no evidence of irrational pricing or capacity behavior, and recent checks point to HDD fundamentals strengthening, meaning a stronger demand backdrop, a broadening customer base, and accelerating pricing,” he told clients.
WDC is currently trading at 18x forward earnings.
How Wall Street Recommends Playing Western Digital
Interestingly, Morgan Stanley’s price target sits below the consensus estimate for Western Digital heading into 2027.
Wall Street currently rates WDC at “Strong Buy” on average, with the mean price target of roughly $650 signaling massive further upside potential from current levels.
www.barchart.com On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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