Up 163% Year to Date, Is Western Digital Still a Buy?

This is an unusually opportune time for investors to buy high-flying tech companies like Western Digital (NASDAQ: WDC).

Western Digital spun off another highflier, Sandisk (NASDAQ: SNDK), back in 2025. While both specialize in data storage, Western Digital makes hard disk drives that are used to store massive amounts of data for long periods, while Sandisk makes solid-state and flash drives, which are used to store and quickly feed data to graphics processing units (GPUs) for ultrafast processing of AI workloads.

Thanks to surging demand for their wares from hyperscalers and others, both of these stocks have gone through the roof. They are major players in the memory and storage space, where demand is far outpacing supply, which gives these companies massive pricing power.

So why is this an opportune time to invest in Western Digital?

Image source: Getty Images.

Up 313% over the past year -- and still cheap

In the case of Western Digital, it is up 163% this year and 313% over the past 12 months, trading at around $451 per share as of this writing. It has a three-year average annualized return of 136%.

Staggering results like that would normally give new investors pause, as it's natural to be wary about buying a stock at a high. But the thing is, Western Digital stock is also down by about 40% from the all-time high of $746 per share that it hit on June 18.

How can a stock lose 40% of its value and still be up 163% year to date? By starting that slide up a remarkable 333% year to date.

So, with the memory and storage industry still in the middle of a boom supercycle phase, Western Digital is now available at a considerable discount. It is trading at just 17 times earnings. Moreover, its five-year P/E-to-growth (PEG) ratio is just 0.88, which means it is undervalued relative to its long-term growth expectations.

Western Digital is still a buy

With its huge earnings power, Western Digital is a screaming buy at those valuations. In its latest quarter, fiscal 2026 Q4, revenue increased by 44% year over year to $3.7 billion, operating margin increased to 41.7% from 26.1% in the prior-year period, and adjusted earnings soared 109% to $3.56 per share.

In its fiscal 2027 first quarter, management anticipates revenue of $4.1 billion, which would be 11% sequentially, adjusted earnings of $4.00 per share, up 12% sequentially, and a gross margin of between 55% and 56%.

The stock also slumped after Q4 earnings were released in August, even though Western Digital beat earnings estimates and outlook projections.

It appears that the major catalyst triggering these declines was its previous valuation. Investors probably saw an opportunity to take profits after such huge gains. But now Western Digital's valuation is back to a reasonable level -- the stock's almost in value territory.

Western Digital is one of just three major players in the hard drive space, and the memory supercycle is not going to slow down any time soon. Western Digital is already sold out of hard disk drives through calendar 2026 and expects demand to outpace supply in 2027 as well. It also has long-term agreements in place with customers going into 2029, 2030, and 2031, which will help it maintain its margins even if the tailwinds of this supercycle slacken.

In light of all that, Western Digital is a strong buy now.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Western Digital. The Motley Fool has a disclosure policy.