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Western Digital (NASDAQ:WDC) stock has bounced nearly 7% since Oct. 23. But at roughly $366 as of this writing, the hard drive maker's shares are still down about 51% from the record close of about $746 they set on June 18. This is a business whose non-GAAP (adjusted) earnings per share just grew 161% year over year.
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My estimate is about $500 a share. I get that by multiplying adjusted earnings per share of about $33.50 in fiscal 2030 by a P/E ratio of 15. From today's price, about $500 would mean returns of roughly 8% a year before dividends.
Put simply, I think the company can keep growing at a solid clip. But the stock likely won't get back to its June high by 2030.
Western Digital's revenue for its fiscal first quarter of 2027 (the period ended Oct. 2, 2026) jumped 55% year over year to $4.38 billion. Profitability improved even faster. Adjusted gross margin expanded to 58.1%, up from 54.4% in the previous quarter and 43.9% a year before. Adjusted earnings per share followed suit, rising from $1.78 a year ago to $3.56 last quarter and $4.64 in fiscal Q1. And the midpoint of management's guidance is $5.80 for the fiscal second quarter, with gross margin between 60% and 61%.
Higher prices drive most of that. Western Digital's average price per terabyte climbed 28% year over year in fiscal Q1, accelerating from gains in the high teens the quarter before.
Exabytes shipped (a measure of total storage capacity sold) grew 22%.
Management also said its incremental gross margin topped 80% year over year. So most of the added revenue is landing as gross profit.
It depends mainly on how long prices keep climbing. Chief financial officer Kris Sennesael said on the fiscal first-quarter call that there's room for price per terabyte to keep rising over the next three or four quarters.
"I would assume eventually that is going to slow down a little bit," he added.
Say Western Digital earns the guided $5.80 in fiscal Q2 and just matches it in each of the final two quarters. Fiscal 2027 earnings per share would be around $22 -- a cautious starting point, because it assumes no growth after this quarter.
From there, I use two company goals. Management said exabyte demand should climb more than 25% a year in the long term, and it aims to lower its cost per terabyte around 10% a year. If price per terabyte stops rising after fiscal 2027 and then drops about 10% a year, gross margin should stay about the same. Revenue would then climb around 12.5% a year.
Buybacks that cut the share count by a couple percent annually could raise earnings-per-share growth to around 15% a year. This puts fiscal 2030 at about $33.50.
Sandisk (NASDAQ:SNDK), which reported on Oct. 29, gives some support. Its data center revenue surged 61% from last quarter to $4.8 billion. It also sees fiscal second-quarter revenue between $12.2 billion and $12.6 billion, versus $11.0 billion for fiscal Q1.
Granted, Sandisk sells flash memory, not hard drives, so its results only indirectly reflect demand for Western Digital's products. But they suggest data center customers are spending more on storage, not less.
At about $366, shares cost roughly 16 times adjusted earnings if you annualize the midpoint of Western Digital's fiscal second-quarter guidance. I pick 15 times earnings for 2030 because hard drive prices can swing hard when supply catches up with demand. Investors might hesitate to pay up for profits from price hikes that could reverse.
Notably, management said its capital spending is going to head and media technology and factory automation, not to adding unit capacity -- a good sign for pricing.
Sure, my path might prove too cautious. If price per terabyte simply stayed steady instead of dropping, lower costs could lift margins further, and earnings per share could land well above my estimate. But a rival adding meaningful capacity might just as easily drive prices down quicker than costs.
All in all, Western Digital looks like a company with a strong few years ahead of it. But a return of around 8% a year is modest for a stock this volatile. And my estimate is just that -- an estimate based mainly on where hard drive prices head next.
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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Western Digital. The Motley Fool has a disclosure policy.
Prediction: This Will Be Western Digital's Stock Price in 2030 was originally published by The Motley Fool
