The computer storage devices industry players are well-poised to gain from solid momentum in cloud computing, Internet of Things (IoT), auto, connected devices, virtual reality and Artificial Intelligence (AI) in the long run.
Per a report from Gartner, worldwide IT spending is projected to reach $5.26 trillion in 2024, indicating an increase of 7.5% from the 2023 levels. This is an improvement over the earlier projection of overall spending of $5.06 trillion.
Gartner also reported that data center systems spending growth is anticipated to be 24% in 2024, up from the previous projection of 10% growth. The upside will be driven by increasing compute power demand, owing to the rapid proliferation of generative AI.
At this stage, we narrowed our search to three giant computer storage device stocks in which investors should focus. These companies are: Super Micro Computer Inc. SMCI, Western Digital Corp. WDC and Pure Storage Inc. PSTG.
These stocks are currently trading at an attractive price, well below their 52-week highs. Most importantly, these stocks offer significant potential for price appreciation in the short-term. Each of our picks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Super Micro Computer Inc.
Super Micro Computer has been benefiting on the back of robust demand for servers powered by high-end generative AI chipsets. SMCI is positioned as a leading provider of one-stop-shop, high-performance rack servers capable of powering advanced AI applications.
An astonishing rise in demand for high-performance rack servers boosted SMCI’s top and bottom lines. In order to support aggressive workloads, data centers are aggressively demanding high-density rack space and direct-to-chip liquid cooling. SMCI makes servers for enterprise, cloud, AI, metaverse and 5G telco/edge IT infrastructure.
Super Micro Computer has an expected revenue and earnings growth rate of 87.5% and 51.7%, respectively, for the current year (ending June 2025).
Enormous Price Upside Potential for SMCI Shares
Super Micro Computer recorded its all-time high price at $1,229.0 on March 8. After that, the stock price tumbled 66.3%. Despite the meltdown, the stock price has jumped 45.1% year to date. The average price target of brokerage firms for the stock represents an increase of 105.3% from the last closing price of $414.60. The brokerage target price is currently in the range of $325-$1,500.
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Western Digital Corp.
Western Digital has been gaining from steady momentum in its HDD and Flash businesses. Higher flash ASPs aided both Client and Consumer end-market segments. For the first quarter of fiscal 2025, WDC’s HDD segment is forecast to gain from the healthy uptake of the SMR product portfolio. The strategy to commercialize ePMR, OptiNAND and UltraSMR technologies bodes well.
In July 2024, WDC unveiled the BiCS8 two-terabyte QLC memory die, crafted to meet the increasing demand for data centers and AI storage. It is currently sampling 64 terabyte SSD, and further aims to deliver in volume shipments by the end of 2024.
WDC expects the proliferation of generative AI-driven storage deployments to result in a client and consumer device refresh cycle, and boost content growth in smartphone, gaming, PC and consumer in the long run. Increasing AI adoption is likely to drive increased storage demand across both HDD and Flash at the edge and core, thereby providing ample business opportunities.
Western Digital has an expected revenue and earnings growth rate of 35.4% and more than 100%, respectively, for the current year (ending June 2025).
WDC Stocks Offer Robust Upside Potential
Western Digital recorded its 52-week high price at $81.55 on June 18. After that, the stock price tumbled 23.2%. Despite the weakness, the stock price has climbed 19.6% year to date. The average price target of brokerage firms for the stock represents an increase of 43.9% from the last closing price of $62.61. The brokerage target price is currently in the range of $75-$115.
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Pure Storage Inc.
Pure Storage is benefiting from robust sales to new and existing enterprise customers across the data storage platform. An increase in demand for FlashBlade solutions, including FlashBlade//E and subscription-based offerings, propels top-line expansion.
PSTG sees strong growth prospects in the data-driven markets of AI, machine learning, IoT, Real-time Analytics, Log Analytics and Simulation. PSTG’s FlashBlade product has been gaining traction in the AI market.
In October 2023, PSTG unveiled data resilience solutions to global enterprises, including Pure Protect//DRaaS, energy efficiency guarantees for its Evergreen portfolio and AI-powered storage services (scalable) through the Pure1 management platform. Pure Protect//DRaaS is a unique Disaster Recovery as a Service (DRaaS) solution.
Pure Storage has an expected revenue and earnings growth rate of 10.5% and 16.2%, respectively, for the current year (ending January 2025).
Huge Price Upside Potential for PSTG Shares
Pure Storage recorded its 52-week high price at $70.41 on June 18. After that, the stock price melted 33.3%. Despite the meltdown, the stock price has surged 31.6% year to date. The average price target of brokerage firms for the stock represents an increase of 36% from the last closing price of $46.94. The brokerage target price is currently in the range of $40-$80.
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