Here's Why You Should Add Western Digital to Your Portfolio.

As one of the largest hard disk drive producers in the United States, Western Digital Corporation WDC is riding on its acquisitions and an expanding SSD storage market. Here is why you should add this Zacks Rank #1 (Strong Buy) stock to your portfolio.

Western Digital has returned 3.1% in the past month, outperforming the industry’s gain of 2%. The company is experiencing robust demand in end markets as well as strong growth prospects for flash-based storage products.

Positive Earnings Surprise History

Western Digital outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive earnings surprise of 8.43%.

Further, the company has a long-term expected EPS growth rate of 25.1%.

Expanding SSD Market & Cloud Deployment

Western Digital has been expanding into the SSD storage market due to declining sales in the PC market. The emergence of thinner laptops, tablets and demand for fast processing storage devices in the past few years has created an ideal market for SSDs. Due to the expansion in digital data, modest growth of TAM and higher demand for storage, Western Digital’s long-term prospects look exciting.

Anticipating potential acceleration in cloud deployments, Western Digital is investing heavily to deliver high capacity storage devices that will support expansion of cloud infrastructure and cloud applications. Additionally, the company has expanded its My Cloud solutions with My Cloud EX4, which enables the user to manage and store huge volumes of digital data.

Acquisitions Driving Growth

Western Digital’s acquisition of SanDisk has aided the company’s growth and also helped it to gain traction in SSD.  Additionally it has allowed the company to step in to the NAND products market, which, owing to its strong demand, will drive the company’s revenues.

Moreover, the company’s acquisition of Amplidata, sTec, Inc., Velobit, Inc. Arkeia Software Solutions and Virident Systems Inc. have not only strengthened its small-to-medium sized business solutions but also expanded its SSD product portfolio.

Valuation

Moreover, from a valuation perspective, the stock looks very attractive as it currently trades significantly lower than the industry average based on a forward earnings estimate, which signifies a huge upward potential. Western Digital currently trades at a forward P/E of 6.52x as against the industry group average of 16.10x.

Conclusion

Management is particularly positive about the company’s flash-based storage segment and joint venture fab operations in Yokkaichi. The ongoing transformation to 3D NAND technology is another tailwind for Western Digital.

With expanding product portfolio, secular growth of digital data and growing exposure to the SMB space, shares of Western Digital look well poised for the long term.

Other Stocks to Consider

Other top-ranked stocks in the broader technology sector are NetApp, Inc NTAP, NVIDIA Corporation NVDA and Broadcom Limited AVGO, all sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

NetApp, NVIDIA and Broadcom have a long-term expected EPS growth rate of 11.34%, 10.25% and 13.75%, respectively.

Zacks Editor-in-Chief Goes "All In" on This Stock

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