WDC - Western Digital - Splitting The Businesses Will Not Rescue The Stock

• We rate WDC a sell primarily due to continued unfavorable risk-reward dynamics through 2H22.
• No significant catalysts for WDC into 2H22, as we expect demand destruction in smartphones and PCs due to inflationary pressures and rising interest rates.
• We expect HDD ASP to improve due to higher demand for large capacity drives from the cloud, offset by NAND pricing pressure due to lower demand from PCs and smartphones.
• While we are optimistic about the long-term growth of the storage sector, we expect WDC to have limited upside potential through 2H22.
• Elliott Management forced split could be hair-raising overall. But the stock could see some initial upside followed by sustained slide.

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