Shares of Irvine-based drive-maker Western Digital Corp. surged Thursday after an analyst upgraded the company and said it was “significantly undervalued” following its recent acquisition of Hitachi Global Storage Technologies Inc.
Investors sent shares up 6.6% to a market value of $9.8 billion on word that Needham & Co. analyst Richard Kugele upgraded the company to a “strong buy” from a “buy” rating. Kugele upped his target price for shares to $66 from $50, contending that Western Digital’s $4.8 billion buy “will prove to be a pivotal point in hard disk drive history and drive record profitability for both Western Digital and Seagate.”
The upgrade was Kugele’s second in as many months.
The company’s stronger-than-expected December results prompted the analyst to raise his rating on Western Digital stock to “buy” from “hold.”
Kugele had downgraded shares in November as recovery costs at Western Digital’s two plants in Thailand mounted in the wake of the worst floods to hit the region in decades.
The Hitachi buy positions Western Digital to battle for the top position among drive makers.
Hard-disk drives store and allow access to data. Western Digital’s disk drives go into computers, external storage devices, corporate networks and consumer electronics such as DVR players.
Western Digital and Hitachi GST combined for about $15 billion in revenue in 2011.
Cupertino-based Seagate Technology LLC—Western Digital’s chief rival—recently acquired the hard disk drive business of Samsung Electronic Co. in South Korea.
That buy was prompted by Western Digital’s offer for Hitachi Global.