July 26 (Reuters) - Western Digital Corp shares soared 18 percent in premarket trading on Thursday, after the hard-disk drive (HDD) maker handily beat analysts’ estimates, underlining a faster-than-expected recovery from the Thailand floods that hit production last year.
Several analysts raised their price targets on the stock, lauding the hard-disk drive (HDD) maker’s ability to maintain high gross margins even as production returns to normal levels.
Shortage of hard drives after flooding in Thailand led to a spike in prices last year. But even as production returns to normal levels, Western Digital and Seagate Technology Plc have maintained their price premiums.
“Guidance clearly signals that, with the recent consolidation of the industry, the company is focused on prioritizing pricing/margins at the expense of market share going forward, a departure from oversupply and irrational pricing that has plagued the industry in the past,” Citi Research analyst Joe Yoo said.
Yoo upped his price target on the stock to $49 from $40.
Western Digital shares soared 18 percent in premarket trading, while those of Seagate were up 10 percent.
“Western Digital benefited from an improved product mix from its acquisition of Hitachi Global Storage Technologies, with significant upside vs. street estimates from its enterprise portfolio,” Barclays analyst Ben Reitzes said.
Western Digital in 2011 unveiled a $4.3 billion deal to buy Hitachi Ltd’s hard drive business.
Barclays raised its price target on the stock to $38 from $32. Three other brokerages also revised their price target.