Western Digital Corporation (NASDAQ:WDC) saw its stock price fall sharply on Friday, dropping 12.7% to $589.54, even as the company continues to trade above the average analyst target of $560.45. The decline came amid a broader sell-off in memory and storage equities, leaving investors questioning whether recent margin strength and upward estimate revisions can justify the stock's premium heading into the August 5 earnings report.
The stock moved between $579.45 and $659.61 during the session, and despite the drop, it remains 5.2% above the Wall Street consensus 12-month price target. According to WSJ market data, the median target stands at $582.50, meaning WDC is still trading about 1.2% above that level. However, the stock is roughly 26% below its June 18 intraday high of $799.87.
The gap between the current price and analyst targets is significant. Without upward revisions to those targets, any further upside for WDC will need to come from stronger earnings rather than an expansion of the price-to-earnings multiple. Fiscal 2027 earnings per share estimates have risen to $17.94, up from $13.57 three months ago, placing the stock at about 33 times that estimate.
The broader memory and storage sector also faced headwinds. Sandisk Corp (NASDAQ:SNDK) fell 8.0%, Seagate Technology Holdings (NASDAQ:STX) shed 11.9%, and Micron Technology (NASDAQ:MU) lost 5.4%. The iShares Semiconductor ETF (NASDAQ:SOXX) dropped 4.5%, while the Invesco QQQ Trust (NASDAQ:QQQ) slipped 0.8%. WDC underperformed the semiconductor ETF by about 8 percentage points and fell roughly 12 points more than QQQ.
Micron's recent earnings had reignited talk of memory supply shortages, but the sector still sold off. Reports from Reuters indicated that Apple (NASDAQ:AAPL) plans to raise iPad and MacBook prices as it struggles to absorb higher memory and storage costs. Reuters also noted that Micron customers have committed to $22 billion in chip orders.
Western Digital's focus has shifted more toward hard drives and storage infrastructure following the completion of its Sandisk spin-off in February 2025. The company's fiscal third-quarter results showed revenue of $3.34 billion, a 45% year-over-year increase, with non-GAAP gross margin reaching 50.5% and free cash flow of $978 million. For the fiscal fourth quarter, management guided for revenue of $3.65 billion (plus or minus $100 million) and non-GAAP gross margin between 51% and 52%.
CEO Irving Tan emphasized in April that virtually every AI workload generates data that ends up on HDDs, underscoring the thesis that hyperscale demand could sustain pricing longer than in previous storage cycles. Meanwhile, Micron CEO Sanjay Mehrotra called his company's results "record" and reiterated comments about the strategic value of memory in the AI era.
Citi analyst Asiya Merchant raised Sandisk's target price to $2,500 from $2,025, maintaining a Buy rating following Micron's report. Despite such bullish calls, the sector experienced a pullback. The Philadelphia SE Semiconductor Index had surged over 90% from its late-March low before retreating this week. Julia Hermann, global market strategist at New York Life Investment Management, noted that tech gains have been concentrated in memory-related equities and questioned whether higher interest rates could put that at risk.
With Western Digital's next earnings report scheduled for August 5, the company faces pressure on two fronts: the market will be watching to see if margins hold near guidance levels and whether the upward estimate revisions can keep pace with a stock that remains above the Street's average target.
