Morgan Stanley is now very confident that hard drive companies like Western Digital and Seagate are about to have a long period of strong growth. They say demand for hard drives is rising because of AI and cloud computing. The analysts believe this strong trend will last longer than people expected.
They increased their price predictions for Western Digital to $171 from $99 and for Seagate to $265 from $168. They also said both stocks are worth buying. They especially like Western Digital, saying its current price is lower than it should be.
The note says that demand for hard drives is going up as more money is spent on cloud services and more data-heavy content is created. At the same time, supply is tight, with the market being up to 10 percent short. This has caused prices to rise and could keep the market strong until at least 2027. Morgan Stanley even thinks the cycle could last until 2028.
The bank expects earnings to grow strongly, predicting more than 35 percent growth in earnings per share and over 30 percent profit margins for both companies. They expect the storage market to grow faster than before and prices per terabyte to drop only slightly. They also see gross profits exceeding 45 percent by early 2027.
Morgan Stanley points out that the hard drive industry has changed. It is no longer slow and highly cyclical. Data is now the fuel for AI, and hard drives are in a small group of companies that will benefit the most.
