Wells sees attractive risk/reward on Western Digital into spin

Wells Fargo keeps an Overweight rating on Western Digital (WDC) with a $95 price target after Kioxia commenced trading on the Tokyo Stock Exchange. The firm investors to now focus on the trading in shares of Kioxia as providing a valuation marker for Western Digital’s forthcoming Sandisk spin-off. At Western Digital’s closing share price on Tuesday of $64.64, it has an implied $27.4B enterprise value, the analyst tells investors in a research note. When Wells uses an 11-times enterprise value to EBIT on Western Digital’s hard-disk-drive business, it arrives at an implied HDD enterprise value at $30B. This leaves an implied negative Sandisk enterprise value at $2.5B, Wells points out. The firm continues to see a sum-of-the-parts analysis as presenting an attractive risk/reward set-up into the forthcoming spin-off.