WDC, STX Stocks Headed For Third Straight Weekly Loss — Wells Fargo Slashes Targets But Sees Opportunity

Wells Fargo remains bullish on both hard disk drive makers despite concerns over rising competition, AI spending, and the sustainability of industry pricing.

• Wells Fargo lowered Western Digital's price target to $450 and Seagate's to $865, while maintaining ‘Overweight’ ratings.
• The firm sees an attractive risk-reward setup, with durable revenue growth of 25% to 30%-plus and a path to gross margins of 60% to 65%-plus.
• Both stocks have faced heavy selling pressure amid concerns that Toshiba's planned production expansion could threaten the industry's pricing power.

Western Digital Corp. (WDC) and Seagate Technology Holdings Plc (STX) are on track to end their third consecutive week in the red, but Wells Fargo sees an opportunity in the hard disk drive makers’ steep selloff, even as it slashed their price targets by as much as 38% on Friday.

According to The Fly, Wells Fargo cut Western Digital's price target to $450 from $730 and Seagate's to $865 from $1,180, while maintaining 'Overweight' ratings on both stocks.

Over the last five trading sessions, WDC shares have fallen around 10%, while STX has plunged nearly 12%. Yet, the analyst remains bullish on the industry's fundamentals. 

The recent underperformance has created an attractive risk-reward setup heading into September-quarter earnings, TheFly noted, citing Wells Fargo. The firm continues to see durable revenue growth of 25% to 30% or more and a path toward gross margins of 60% to 65% or higher.

At the time of this writing, WDC stock was down nearly 2%, while STX was also trading over 1% lower in Friday’s premarket session.

Why WDC, STX Have Plunged Lately

Wells Fargo's outlook comes amid a sharp selloff in data-storage stocks and broader weakness in AI-linked stocks, as investors question the sustainability of infrastructure spending amid higher borrowing costs and increasing scrutiny of returns on AI investments.

Earlier this month, both WDC and STX came under pressure on October 2 after Nikkei reported that Japanese rival Toshiba planned to double production capacity for hard drives used in artificial intelligence (AI) data centers by fiscal 2027.

The reported expansion, backed by an investment of approximately $380 million, raised concerns that additional supply could weaken the pricing power and profit margins Western Digital and Seagate have enjoyed amid strong AI-driven storage demand.

What Last Earnings Report Shows

The companies' latest financial results illustrate the growth underpinning Wells Fargo's outlook.

In August, Western Digital reported fiscal fourth-quarter (Q4) revenue growth of 44% year over year to $3.75 billion, with adjusted gross margin reaching 54.4%.

Meanwhile, in July, Seagate reported fiscal fourth-quarter (Q4) revenue of $3.63 billion, up approximately 48.5% year over year, while adjusted gross margin reached 52.7%.

What Comes Next?

Western Digital is scheduled to report fiscal first-quarter 2027 results on October 22, followed by Seagate on October 27.

Both companies previously guided for quarterly revenue of approximately $4.1 billion. Investors will be watching for updated demand visibility, customer commitments and gross-margin expectations to assess whether increasing competition threatens the industry's growth outlook.

What Retail Thinks About WDC and STX Stock

On Stocktwits, retail investors’ sentiment around WDC stock remained in the ‘bearish’ zone, while STX stock sentiment was ‘neutral.’  So far this year, WDC stock has rallied nearly 90%, while STX shares have climbed over 140%. 

By comparison, the State Street SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust, Series 1 (QQQ), which hold the stocks, have risen around 13% and 19%, respectively, during this period.

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