- 3 Stocks That May Be Priced Below Their Estimated Value In May 2026
May 12, 2026
The United States market has shown robust performance, rising 2.6% over the last week and 26% over the past year, with earnings expected to grow by 17% annually. In such a thriving environment, identifying stocks that are potentially priced below their estimated value can offer investors opportunities for growth as they seek to capitalize on undervalued assets amidst positive market conditions.
Top 10 Undervalued Stocks Based On Cash Flows In The United States
Name Current Price Fair Value (Est) Discount (Est) Western Digital (WDC) $515.83 $1001.92 48.5% Tuniu (TOUR) $5.71 $11.41 50% Sea (SE) $84.87 $164.01 48.3% Rayonier (RYN) $20.31 $40.03 49.3% MercadoLibre (MELI) $1557.30 $3035.20 48.7% Lazard (LAZ) $45.98 $89.64 48.7% Kodiak Gas Services (KGS) $75.52 $150.36 49.8% Janus Living (JAN) $27.23 $54.11 49.7% iRhythm Holdings (IRTC) $116.84 $233.64 50% CVR Energy (CVI) $34.88 $67.50 48.3%
Click here to see the full list of 141 stocks from our Undervalued US Stocks Based On Cash Flows screener.
We're going to check out a few of the best picks from our screener tool.
Cohu
Overview: Cohu, Inc. operates through its subsidiaries to offer semiconductor test equipment and services across various regions including the United States, Taiwan, China, Malaysia, the Philippines, Singapore, and internationally with a market cap of approximately $2.34 billion.
Operations: The company's revenue primarily comes from its Semiconductor Test & Inspection segment, which generated $481.28 million.
Estimated Discount To Fair Value: 33.7%
Cohu is trading at US$51.28, significantly below its estimated future cash flow value of US$77.37, indicating potential undervaluation based on discounted cash flows. Despite a net loss of US$12.07 million in Q1 2026, earnings are forecast to grow annually by over 100%. Recent sales growth and strategic orders in the high-performance computing market highlight Cohu's expanding footprint and potential for profitability within three years, supported by robust demand for its Eclipse platform.
Upon reviewing our latest growth report, Cohu's projected financial performance appears quite optimistic. Click to explore a detailed breakdown of our findings in Cohu's balance sheet health report.COHU Discounted Cash Flow as at May 2026
BlackSky Technology
Overview: BlackSky Technology Inc. is a space-based technology company operating in the United States and internationally, with a market cap of $1.46 billion.
Operations: The company's revenue segment includes the Blacksky Division, which generated $97.81 million.
Estimated Discount To Fair Value: 24.7%
BlackSky Technology is trading at US$41.38, more than 20% below its estimated future cash flow value of US$54.97, suggesting potential undervaluation. The company forecasts revenue growth of 24.1% annually and expects to become profitable within three years, outpacing the market average. Recent earnings guidance was raised due to strong sales performance and increased demand for Gen-3 solutions, despite a net loss in Q1 2026 compared to the previous year.
Story Continues
The analysis detailed in our BlackSky Technology growth report hints at robust future financial performance. Get an in-depth perspective on BlackSky Technology's balance sheet by reading our health report here.BKSY Discounted Cash Flow as at May 2026
Beazer Homes USA
Overview: Beazer Homes USA, Inc. operates as a homebuilder in the United States with a market capitalization of approximately $496.06 million.
Operations: The company's revenue segments consist of Homebuilding in the East generating $545.18 million, Homebuilding in the West contributing $1.26 billion, and Homebuilding in the Southeast with $301.52 million.
Estimated Discount To Fair Value: 41.9%
Beazer Homes USA is trading at US$25.16, significantly below its estimated future cash flow value of US$43.29, indicating undervaluation based on discounted cash flow analysis. Despite a recent net loss and declining revenue, the company anticipates rapid earnings growth of 176.76% annually and aims to become profitable within three years. The cancellation of a proposed acquisition by Dream Finders Homes underscores Beazer's belief in its higher intrinsic value than the offer suggested.
According our earnings growth report, there's an indication that Beazer Homes USA might be ready to expand. Navigate through the intricacies of Beazer Homes USA with our comprehensive financial health report here.BZH Discounted Cash Flow as at May 2026
Turning Ideas Into Actions
Discover the full array of 141 Undervalued US Stocks Based On Cash Flows right here. Invested in any of these stocks? Simplify your portfolio management with Simply Wall St and stay ahead with our alerts for any critical updates on your stocks. Take control of your financial future using Simply Wall St, offering free, in-depth knowledge of international markets to every investor.
Looking For Alternative Opportunities?
Explore high-performing small cap companies that haven't yet garnered significant analyst attention. Diversify your portfolio with solid dividend payers offering reliable income streams to weather potential market turbulence. Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include COHUBKSY and BZH.
This article was originally published by Simply Wall St.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
View Comments
- Western Digital and Dream Finders Homes have been highlighted as Zacks Bull and Bear of the Day
May 12, 2026
For Immediate Release
Chicago, IL – May 12, 2026 – Zacks Equity Research shares Western Digital WDC as the Bull of the Day and Dream Finders Homes DFH as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Boeing Company’s BA, RTX Corp. RTX and Lockheed Martin LMT.
Here is a synopsis of all five stocks:
Bull of the Day:
Western Digital Corp., a Zacks Rank #1 (Strong Buy), has seen its shares surge over the past year as the company benefits from an accelerating transformation driven by artificial intelligence and explosive demand for storage solutions. The company is a leader in enterprise hard disk drives (HDDs) and nearline storage.
The stock has broken out to an all-time high in 2026 on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.
Western Digital is part of the Zacks Computer – Storage Devices industry group, which currently ranks in the top 13% out of approximately 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months, just as it has over the past year:
Stocks in this industry are relatively undervalued based on traditional valuation metrics. They are also projected to experience above-average earnings growth, which signifies a powerful combination that should lead to higher prices in the future.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Western Digital manufactures and sells data storage devices and solutions based on HDD technology in the United States, Asia, Europe, the Middle East, and Africa. The company offers internal HDDs, data center drives and platforms, as well as external and portable drives.
In a year where artificial intelligence reshaped the technology landscape, few companies captured the momentum quite like Western Digital. Innovations such as UltraSMR and heat-assisted magnetic recording have enabled the company to ship industry-leading 30TB+ drives tailored for AI data lakes. Strong free cash flow generation and a fortified balance sheet provide additional financial flexibility as the company capitalizes on multi-year hyperscaler buildouts.
Story Continues
The storage specialist, a standout in the Zacks Computer – Storage Devices industry, witnessed its shares surge nearly 300% last year, significantly outperforming both the broader market and its peers. And the industry's tailwinds are just getting started. AI-powered storage markets are exploding—from $30.27 billion in 2025 to a projected $187.61 billion by 2035 at a 20% compounded annual growth rate. Data center operators and hyperscalers continue to expand infrastructure at an unprecedented pace, driving sustained demand for the company’s HDD solutions.
Earnings Trends and Future Estimates
What stands out is Western Digital’s consistent ability to deliver positive earnings surprises; the storage provider has exceeded EPS estimates in each of the past 13 quarters. The company delivered a trailing four-quarter average surprise of over 11%, reflecting strong execution in converting AI-driven demand into results. This track record aligns perfectly with the power of the Zacks Rank system, which prioritizes stocks showing upward earnings revisions.
Western Digital’s transformation has been remarkable. The company reported fiscal third-quarter results back in April that exceeded expectations, with adjusted EPS of $2.72 beating the Zacks Consensus Estimate by nearly 13%. Revenue of $3.34 billion topped forecasts by about 3%. Increasing sales in the cloud end market are being driven by solid demand for higher-capacity nearline products.
The California-based company has been the beneficiary of improving earnings estimate revisions as of late. Looking into the current quarter, analysts have raised their EPS estimates by 28.13% in the past 60 days. The Zacks Consensus Estimate now stands at $3.28 per share, reflecting nearly 98% growth relative to the year-ago quarter.
Let’s Get Technical
Western Digital was the second-best performer in the S&P 500 last year. Only stocks that are in extremely powerful uptrends are able to make this type of price move and widely outperform the market. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Notice how shares remain above upward-sloping 50-day (blue line) and 200-day (red line) moving averages. The momentum has clearly carried over in 2026. With both strong fundamentals and technicals, Western Digital stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Western Digital has recently witnessed positive revisions. As long as this trend remains intact (and WDC continues to deliver earnings beats), the stock will likely continue its bullish run throughout this year.
Bottom Line
Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. Currently, WDC carries a Zacks Rank #1 (Strong Buy), driven by favorable estimate momentum.
Solid institutional buying should continue to provide a tailwind for the stock price. Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. If you haven’t already done so, be sure to put WDC on your watchlist.
Bear of the Day:
Dream Finders Homes is engaged in the homebuilding business in the United States. The company designs, constructs, and sells single-family homes in some of the country’s hottest markets including Florida, North Carolina, Colorado, Texas, and the Washington D.C. metropolitan area.
The homebuilder also provides insurance agency services including escrow, closing, and title insurance. Founded in 2008, the company markets its homes under various brands including Dream Finders Homes, DF Luxury, Reverie Active Adult Lifestyle, Craft Homes and Coventry Homes.
While Dream Finders Homes delivered rapid growth in the post-pandemic housing boom, the current environment exposes significant vulnerabilities. Recent Q1 2026 results highlight a classic downturn trade-off: aggressive incentives are driving order volume but crushing margins and profitability. Combined with regional risks and rising leverage, the company faces material downside risk.
Elevated mortgage rates and macroeconomic uncertainty are hitting consumer confidence and affordability hard. The Southeast-focused homebuilder has been forced to offer sizeable incentives to boost demand, but this is not sustainable. Builders cannot indefinitely subsidize demand without destroying returns. If the market remains affordability-constrained, future quarters will likely show continued pressure or the need for even deeper incentives, further compressing earnings.
The Zacks Rundown
Dream Finders Homes has been severely underperforming the market over the past year. A Zacks Rank #5 (Strong Sell), the stock experienced a climax top in September of last year and has been in a price downtrend ever since. The stock is hitting a series of 52-week lows and represents a compelling short opportunity.
Shares are part of the Zacks Building Products – Home Builders industry group, which currently ranks in the bottom 7% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months, just as it has over the past year:
While individual stocks have the ability to outperform even when included in weak industries, their industry association serves as a headwind for any potential rallies. Stocks in this industry are also expected to post below-average earnings growth. With much better alternatives in the current market environment, this stock should be avoided.
Weak Foundation: Earnings Misses and Deteriorating Forecasts
Earnings misses have been a sore spot for Dream Finders Homes lately. The homebuilder most recently reported Q1 earnings results back in April of 11 cents per share, which represented a 57.8% miss versus the $0.26/share consensus estimate. Revenues of $887.8 million were down from $989.9 million in the year-ago period, driven by a 14% decline in homebuilding revenue.
The company fell short of the earnings mark in three of the past four quarters, posting an average miss of 19.5% versus projections over that timeframe. Consistently missing expectations by a wide margin is a recipe for stock price underperformance.
Analysts have revised full-year earnings estimates downward by 13.59% in the past 60 days. The Zacks Consensus Estimate now stands at $1.59/share, reflecting a 25.7% plunge relative to last year. These are the types of negative trends that the bears like to see.
Technical Outlook
DFH stock has been steadily falling since late last year and has now established a well-defined downtrend. Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping down. Shares have declined nearly 15% already this year, and the stock continues to trade below both moving averages.
DFH stock has also experienced what is known as a “death cross,” wherein the stock’s 50-day moving average crosses below its 200-day moving average. Shares would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock.
Final Thoughts
As a smaller player, DFH lacks the scale, purchasing power, land bank depth, and brand strength of national builders. In a tougher market, larger competitors can more easily absorb cost pressures or use incentives strategically without as much margin damage.
A deteriorating fundamental and technical backdrop show that this stock doesn’t deserve a spot in the household portfolio. The fact that DFH stock is included in one of the worst-performing industry groups adds yet another headwind to a long list of concerns. Falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
DFH stock is rated a worst-possible ‘F’ in our Zacks Growth Style Score category, indicating more weakness ahead is likely. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy.
Additional content:
Boeing Stock Surges +6.9% in a Month: Time to Hold or Book Profits?
The Boeing Company’s shares have risen 6.9% in the past month against the Zacks Aerospace-Defense industry’s decline of 7.5%. The company is seeing growth across its commercial, defense and services businesses, driven by robust aircraft demand, significant contract awards and a solid backlog that underpins sustained revenue growth.
Shares of other defense stocks, such as RTX Corp. and Lockheed Martin, have declined 12.6% and 18.3%, respectively, during the same time frame. RTX continues to secure strong demand for its combat-proven defense systems from the Pentagon and allied nations, while Lockheed Martin keeps leveraging its broad defense portfolio to win major contracts and strengthen its backlog.
Considering Boeing’s outperformance relative to its industry, investors may be wondering whether now is a good time to add the stock to their portfolios. Let’s examine the factors that have driven the share price gains and assess the company’s investment prospects to make a more informed decision.
Factors Acting in Favor of BA
Boeing remains one of the largest aircraft manufacturers in the United States in terms of revenues, orders and deliveries, particularly in the commercial aerospace industry. Supported by steadily growing demand in the commercial aerospace market, the company, a leading jet manufacturer, has been witnessing strong delivery and order activity.
During the first quarter of 2026, the company booked 140 net commercial airplane orders. Such solid order activities should continue to bolster revenue performance for Boeing’s commercial business over the long run.
Due to its diverse defense product portfolio and established footprint in the space technology industry, Boeing witnesses a solid inflow of contracts. During the first quarter of 2026, the Boeing Defense, Space & Security (“BDS”) unit booked $9 billion in orders, including contracts to continue E-7 Wedgetail development and additional international demand for KC-46 aircraft. This helped the segment maintain a strong backlog of $86 billion as of March 31, 2026. Strong contract wins and a robust backlog position should continue to support the BDS unit’s revenues, which grew 21% year over year in the first quarter of 2026.
The aviation services market, particularly the commercial segment, is set for significant growth in the coming years, fueled by technological advancements, shifting consumer preferences and geopolitical influences. Boeing forecasts a $4.7-trillion market opportunity for commercial aviation support and services in the 20-year period through 2044.
Challenges Confronting BA
Slow production, delayed deliveries and ongoing inspections have likely affected customer sentiment for Boeing’s commercial airplanes, leading to recent order cancellations. Aircraft order cancellations during the three months ended March 31, 2026, totaled $933 million and primarily relate to 737 and 787 aircraft. Ongoing trade tensions between the United States and China pose another challenge. Any escalation in trade disputes could delay these deliveries, hurt Boeing Commercial Airplanes’ revenues and increase inventory costs.
Estimates for BA Stock
The Zacks Consensus Estimate for 2026 earnings per share (EPS) has decreased 120.83% in the past 60 days.
The Zacks Consensus Estimate for RTX’s 2026 EPS has increased 1.47% in the past 60 days. The Zacks Consensus Estimate for Lockheed Martin’s 2026 EPS has increased 0.03% in the past 60 days.
BA’s Earnings Surprise History
The company beat on earnings in two of the trailing four quarters and missed in the other two, delivering an average negative surprise of 77.71%.
BA Stock’s Liquidity
The company’s current ratio is 1.18 compared with the industry’s average of 1.13. The ratio of more than one suggests a healthy liquidity position where the business can meet its immediate financial obligations without selling long-term assets.
BA Stock Trades at a Discount
In terms of valuation, Boeing’s forward 12-month price-to-sales (P/S) is 1.84X, a discount to the industry’s average of 2.48X. This suggests that investors will be paying a lower price than the company's expected sales growth compared with that of its peer group.
What Should an Investor Do Now?
Boeing continues to benefit from strong commercial aircraft demand, with rising jet orders and deliveries supporting long-term growth in its aerospace business. Its defense and space divisions are also seeing solid contract momentum and backlog expansion, while the company expects major long-term growth opportunities in global aviation services.
Considering ongoing trade tensions and its negative earnings growth, new investors should wait and look for a better entry point. Investors who already hold this Zacks Rank #3 (Hold) stock may consider retaining it, given the company’s strong liquidity and price performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Get all the details here >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Boeing Company (BA) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
Western Digital Corporation (WDC) : Free Stock Analysis Report
RTX Corporation (RTX) : Free Stock Analysis Report
Dream Finders Homes, Inc. (DFH) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
View Comments
- 3 Stocks That May Be Trading Below Their Estimated Value In May 2026
May 12, 2026
Over the last 7 days, the United States market has risen by 2.6%, contributing to a remarkable 26% increase over the past year, with earnings anticipated to grow by 17% per annum in the coming years. In this thriving environment, identifying stocks that may be trading below their estimated value can offer investors potential opportunities for growth and value appreciation.
Top 10 Undervalued Stocks Based On Cash Flows In The United States
Name Current Price Fair Value (Est) Discount (Est) Western Digital (WDC) $515.83 $1001.92 48.5% Tuniu (TOUR) $5.71 $11.41 50% Sea (SE) $84.87 $164.01 48.3% Rayonier (RYN) $20.31 $40.03 49.3% MercadoLibre (MELI) $1557.30 $3035.20 48.7% Lazard (LAZ) $45.98 $89.64 48.7% Kodiak Gas Services (KGS) $75.52 $150.36 49.8% Janus Living (JAN) $27.23 $54.11 49.7% iRhythm Holdings (IRTC) $116.84 $233.64 50% CVR Energy (CVI) $34.88 $67.50 48.3%
Click here to see the full list of 141 stocks from our Undervalued US Stocks Based On Cash Flows screener.
Here's a peek at a few of the choices from the screener.
Western Digital
Overview: Western Digital Corporation develops, manufactures, and sells data storage devices and solutions based on hard disk drive technology across various regions including the United States, Asia, Europe, the Middle East, and Africa with a market cap of approximately $165.45 billion.
Operations: The company generates revenue from its Hard Disk Drives (HDD) segment, amounting to $11.78 billion.
Estimated Discount To Fair Value: 48.5%
Western Digital appears undervalued based on cash flows, trading 48.5% below its estimated fair value of US$1001.92 per share with a current price of US$515.83. Recent earnings showed significant growth, with Q3 net income rising to US$3.21 billion from US$520 million year-over-year, indicating strong cash flow generation. The company forecasts robust revenue and profit growth exceeding market averages, despite recent insider selling activity that may warrant caution for potential investors.
The analysis detailed in our Western Digital growth report hints at robust future financial performance. Delve into the full analysis health report here for a deeper understanding of Western Digital.WDC Discounted Cash Flow as at May 2026
Kodiak Gas Services
Overview: Kodiak Gas Services, Inc. operates by providing contract compression infrastructure for the oil and gas industry in the United States, with a market cap of $6.15 billion.
Operations: Kodiak Gas Services generates revenue primarily from Contract Services, which account for $1.18 billion, alongside Other Services contributing $126.83 million.
Estimated Discount To Fair Value: 49.8%
Kodiak Gas Services is trading at a significant discount, 49.8% below its estimated future cash flow value of US$150.36 per share. Despite slower revenue growth forecasts compared to the broader market, its earnings are projected to grow significantly faster than market averages over the next three years. However, recent insider selling and insufficient coverage of interest payments by earnings highlight potential financial concerns that investors should consider alongside its undervaluation based on cash flows.
Story Continues
Insights from our recent growth report point to a promising forecast for Kodiak Gas Services' business outlook. Take a closer look at Kodiak Gas Services' balance sheet health here in our report.KGS Discounted Cash Flow as at May 2026
Owens Corning
Overview: Owens Corning is a company that supplies residential and commercial building products across the United States, Europe, the Asia Pacific, and internationally, with a market cap of approximately $9.65 billion.
Operations: The company's revenue is primarily derived from its Roofing segment at $4.28 billion, followed by Insulation at $3.66 billion, and Doors at $2.06 billion.
Estimated Discount To Fair Value: 10.2%
Owens Corning trades at 10.2% below its estimated future cash flow value of US$133.43 per share, indicating it is undervalued based on cash flows. Despite high debt levels and a dividend not well covered by earnings, its projected profitability and return on equity are expected to improve significantly over the next three years. However, recent earnings reports show declining sales and net losses, which could impact short-term financial performance despite positive long-term forecasts.
Our expertly prepared growth report on Owens Corning implies its future financial outlook may be stronger than recent results. Dive into the specifics of Owens Corning here with our thorough financial health report.OC Discounted Cash Flow as at May 2026
Turning Ideas Into Actions
Reveal the 141 hidden gems among our Undervalued US Stocks Based On Cash Flows screener with a single click here. Invested in any of these stocks? Simplify your portfolio management with Simply Wall St and stay ahead with our alerts for any critical updates on your stocks. Join a community of smart investors by using Simply Wall St. It's free and delivers expert-level analysis on worldwide markets.
Searching for a Fresh Perspective?
Explore high-performing small cap companies that haven't yet garnered significant analyst attention. Diversify your portfolio with solid dividend payers offering reliable income streams to weather potential market turbulence. Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include WDCKGS and OC.
This article was originally published by Simply Wall St.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
View Comments
- Bull of the Day: Western Digital (WDC)
May 12, 2026
Western Digital Corporation, a Zacks Rank #1 (Strong Buy), has seen its shares surge over the past year as the company benefits from an accelerating transformation driven by artificial intelligence and explosive demand for storage solutions. The company is a leader in enterprise hard disk drives (HDDs) and nearline storage.
The stock has broken out to an all-time high in 2026 on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.
Western Digital is part of the Zacks Computer – Storage Devices industry group, which currently ranks in the top 13% out of approximately 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months, just as it has over the past year:Zacks Investment Research
Image Source: Zacks Investment Research
Take note of the favorable characteristics for this group below. Stocks in this industry are relatively undervalued based on traditional valuation metrics. They are also projected to experience above-average earnings growth, which signifies a powerful combination that should lead to higher prices in the future.Zacks Investment Research
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Western Digital manufactures and sells data storage devices and solutions based on HDD technology in the United States, Asia, Europe, the Middle East, and Africa. The company offers internal HDDs, data center drives and platforms, as well as external and portable drives.
In a year where artificial intelligence reshaped the technology landscape, few companies captured the momentum quite like Western Digital. Innovations such as UltraSMR and heat-assisted magnetic recording have enabled the company to ship industry-leading 30TB+ drives tailored for AI data lakes. Strong free cash flow generation and a fortified balance sheet provide additional financial flexibility as the company capitalizes on multi-year hyperscaler buildouts.
The storage specialist, a standout in the Zacks Computer – Storage Devices industry, witnessed its shares surge nearly 300% last year, significantly outperforming both the broader market and its peers. And the industry's tailwinds are just getting started. AI-powered storage markets are exploding—from $30.27 billion in 2025 to a projected $187.61 billion by 2035 at a 20% compounded annual growth rate. Data center operators and hyperscalers continue to expand infrastructure at an unprecedented pace, driving sustained demand for the company’s HDD solutions.
Story Continues
Earnings Trends and Future Estimates
What stands out is Western Digital’s consistent ability to deliver positive earnings surprises; the storage provider has exceeded EPS estimates in each of the past 13 quarters. The company delivered a trailing four-quarter average surprise of over 11%, reflecting strong execution in converting AI-driven demand into results. This track record aligns perfectly with the power of the Zacks Rank system, which prioritizes stocks showing upward earnings revisions.
Western Digital’s transformation has been remarkable. The company reported fiscal third-quarter results back in April that exceeded expectations, with adjusted EPS of $2.72 beating the Zacks Consensus Estimate by nearly 13%. Revenue of $3.34 billion topped forecasts by about 3%. Increasing sales in the cloud end market are being driven by solid demand for higher-capacity nearline products.
The California-based company has been the beneficiary of improving earnings estimate revisions as of late. Looking into the current quarter, analysts have raised their EPS estimates by 28.13% in the past 60 days. The Zacks Consensus Estimate now stands at $3.28 per share, reflecting nearly 98% growth relative to the year-ago quarter.Zacks Investment Research
Image Source: Zacks Investment Research
Let’s Get Technical
Western Digital WDC was the second-best performer in the S&P 500 last year. Only stocks that are in extremely powerful uptrends are able to make this type of price move and widely outperform the market. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.StockCharts
Image Source: StockCharts
Notice how shares remain above upward-sloping 50-day (blue line) and 200-day (red line) moving averages. The momentum has clearly carried over in 2026. With both strong fundamentals and technicals, Western Digital stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Western Digital has recently witnessed positive revisions. As long as this trend remains intact (and WDC continues to deliver earnings beats), the stock will likely continue its bullish run throughout this year.
Bottom Line
Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. Currently, WDC carries a Zacks Rank #1 (Strong Buy), driven by favorable estimate momentum.
Solid institutional buying should continue to provide a tailwind for the stock price. Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. If you haven’t already done so, be sure to put WDC on your watchlist.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Western Digital Corporation (WDC) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
View Comments
- SanDisk Did In Months What Nvidia Took 9 Years To Pull Off — And The Chart Looks Almost Unreal
May 11, 2026
Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.
The chart below looks like AI-generated, but it’s not.
Since its February 2025 spin-off from Western Digital Corp., SanDisk Corp. has gained 4,086%. Nvidia Corp., the AI poster child of the decade, has gained 4,006% — over nearly nine years.
SanDisk did in 15 months what Nvidia took nearly a decade to deliver.
The reflex on Wall Street has been to call it a meme.
It isn’t.
Behind the parabola sits the most violent supply-demand mismatch the memory industry has seen since 2017, what Wall Street analysts now call the AI memory supercycle.
Don't Miss:
A single bad hire can set a startup back years. Here are the 5 hires founders most often misjudge — and why Still Learning the Market? These 50 Must-Know Terms Can Help You Catch Up Fast
Nvidia vs. Sandisk Performance Comparison: This Chart Is Shocking Every Trader
The Three Memories That Run AI
Every AI server runs on three different kinds of memory chip, made by largely the same handful of companies.
DRAM is the working memory. It is what holds the data your computer is actively using — and what holds the parameters of an AI model while it runs. It is fast, but it forgets everything when the power is cut. NAND flash is the storage memory. It is what’s inside an SSD or a USB stick. It is slower than DRAM, but it keeps data forever and costs a fraction per gigabyte. AI training datasets, model checkpoints, and retrieval databases all live on NAND. HBM, or high-bandwidth memory, is a special kind of DRAM. Engineers stack 8, 12, or 16 DRAM chips on top of each other and bond the stack directly next to a GPU. The result is a memory pipe wide enough to feed an Nvidia GPU at full speed. Without HBM, AI accelerators starve.
Who Makes The Memory Nvidia Buys
The supplier list is short.
Three companies make almost all the world’s DRAM and HBM: Samsung Electronics Co., Ltd. and SK Hynix Inc. of South Korea, and Micron Technology Inc. of Idaho.
Together they control more than 95% of global DRAM production and 100% of HBM.
SK Hynix is the king of the hill. It supplies roughly 90% of Nvidia’s HBM. Every Blackwell GPU shipped today carries SK Hynix memory.
For NAND flash, the cast widens by two. Samsung, SK Hynix, and Micron compete with Kioxia Holdings Corp. of Japan and SanDisk.
According to TrendForce, NAND market share at the end of third-quarter 2025 broke down roughly as: Samsung 32%, SK Hynix 19%, Kioxia 15%, Micron 13%, SanDisk 12%. The five together control more than 90%.
Story Continues
That is the entire supplier base for the AI economy. Five companies on three continents.
Trending: Avoid the #1 Investing Mistake: How Your ‘Safe' Holdings Could Be Costing You Big Time
Why Supply Has Run Out
The bottleneck is mechanical, not narrative.
HBM consumes roughly three times the wafer capacity per gigabyte as standard DRAM, but it sells for ten times the price.
Every Samsung, SK Hynix, and Micron fab on earth has spent the last 18 months converting DRAM lines to HBM as fast as physics allows. According to IDC, up to 70% of all memory chips made globally in 2026 will go to AI data centers.
The result is that everything is short at once. HBM is short because every fab is racing to make it.
Standard DRAM is short because the fabs no longer have room. NAND is short because the same companies make NAND too — and because hyperscalers building AI data centers need vast NAND-based SSDs to store their training data.
Every company involved is now sold out. SK Hynix told investors on its October earnings call that HBM, DRAM, and NAND for 2026 are essentially booked.
Samsung’s memory chief warned on April 30 that significant shortages will continue through at least 2027. SanDisk has gone further — customer conversations now point to tightness extending into 2028.
Hyperscalers are signing three-, five-, and seven-year prepayment contracts to lock in supply. The buyers are absorbing the volume risk this time, not the sellers.
Why SanDisk Is Catching Up Fast
If the squeeze explains why all five names are running, it doesn’t explain why SanDisk has run hardest.
Three reasons.
It’s the only pure-play left. Samsung is a vast conglomerate. SK Hynix and Micron split capacity between HBM, DRAM, and NAND. SanDisk, since its February 2025 spin-off, makes nothing but NAND flash. Investors looking for clean exposure to the storage half of the AI build-out have nowhere else to go.
It made the right capacity bet. Through the painful 2022–2023 memory downturn, SanDisk and its joint-venture partner Kioxia kept production lean. They entered 2026 with a lower cost base than peers. When NAND contract prices surged this year, the bulk of the price increase dropped straight to gross margin. SanDisk’s reported margins are now modeled at 80%-plus through fiscal 2027.
It is leading the next architecture. SanDisk is developing High-Bandwidth Flash, or HBF — the same vertical-stacking idea as HBM, but using NAND instead of DRAM. The pitch: HBM is fast but capacity-limited (Nvidia’s flagship Blackwell GPU carries just 192 GB of it). HBF promises 8 to 16 times the capacity in the same footprint, at lower cost. First samples are expected in the second half of 2026. If HBF becomes the standard, SanDisk’s addressable market roughly doubles.
The numbers back the story. SanDisk reported fiscal third-quarter 2026 revenue of $5.95 billion, up 251% year over year, with datacenter revenue alone jumping 645%.
See Also: Skip the Regrets: The Essential Retirement Tips Experts Wish Everyone Knew Earlier.
Why Are Micron And Sandisk Still ‘Cheap’?
Here is where the story turns strange.
The hardware that runs the AI economy — sold out, on multi-year contracts, with 80%-plus margins — is being priced by the market like a cyclical commodity industry staring at a downturn.
Company YTD % (Next 12m) P/E SanDisk Corp. +533% 9.5x Micron Technology Inc. +157% 8.0x Samsung Electronics Co., Ltd. +126% 5.3x SK Hynix Inc. +154% 5.1x Kioxia Holdings Corp. +316% 8.8x
For comparison: the SPDR S&P 500 ETF Trust (NYSE:SPY) trades at 21.5 times forward earnings. Nvidia trades at roughly 37x.
The world’s most irreplaceable chip companies trade like commodity steel mills.
The reason is simple: earnings are exploding faster than share prices. Micron posted fiscal second-quarter 2026 revenue of $23.86 billion versus $8.05 billion a year earlier, with non-GAAP EPS up 682%.
Goldman Sachs noted Micron alone now accounts for 51% of all S&P 500 EPS revisions this year.
The Street is racing to update models, and the stocks are racing the Street.
What Wall Street Is Saying
Per Benzinga’s Analyst Stock Ratings page, the most recent calls on SanDisk run aggressively above prior consensus.
Bernstein raised its SanDisk target to $1,700 from $1,250 on May 4, reiterating Outperform after a Q3 earnings beat the firm called broad-based with conservative Q4 guidance.
Bank of America, through Wamsi Mohan, lifted its target to $1,550 from $1,080 on May 6, citing strong demand from hyperscalers and the protective effect of new multi-year contracts. The Street-high is $2,000, set by Susquehanna.
The Question The Tape Is Asking
The bear case is not gone. Memory has crashed before. New fab capacity will eventually arrive. A recession or a hyperscaler capex pause could break the contract architecture.
What is unusual about this cycle is how much of that risk has been transferred. Customers are paying upfront, on multi-year contracts. Supply cannot move for years. And the multiples have compressed in the wrong direction — earnings have outrun the stocks.
If SK Hynix at 5x, Samsung at 5x, and Micron at 8x reflect a scenario the operating data refuses to validate, then the rally that took SanDisk past Nvidia in 15 months may not be a peak. It may be a re-rating that hasn’t finished.
Image: Shutterstock
Read Next: Thinking about ETFs? See what investment risks you should be aware of before you buy.
Building Wealth Across More Than Just the Market
Building a resilient portfolio means thinking beyond a single asset or market trend. Economic cycles shift, sectors rise and fall, and no one investment performs well in every environment. That's why many investors look to diversify with platforms that provide access to real estate, fixed-income opportunities, professional financial guidance, precious metals, and even self-directed retirement accounts. By spreading exposure across multiple asset classes, it becomes easier to manage risk, capture steady returns, and create long-term wealth that isn't tied to the fortunes of just one company or industry.
Connect Invest
Connect Invest is a real estate investment platform that allows investors to access short-term, fixed-income opportunities backed by a diversified portfolio of residential and commercial real estate loans. Through its Short Notes structure, investors can choose defined terms (6, 12, or 24 months) and earn monthly interest payments while gaining exposure to real estate as an asset class. For investors focused on diversification, Connect Invest may serve as one component within a broader portfolio that also includes traditional equities, fixed income, and other alternative assets—helping balance exposure across different risk and return profiles.
Mode Mobile
Mode Mobile is changing the way people interact with their phones by letting users earn money from the same apps and activities they already use every day. Instead of platforms keeping all the advertising revenue, Mode Mobile shares a portion back with users who engage with content, play games, and scroll on their devices. Named one of Deloitte's fastest-growing software companies in North America, the company has built a large beta user base and is scaling a model that turns everyday smartphone usage into a potential income stream. For investors, Mode Mobile offers exposure to the expanding mobile advertising and attention economy through a pre-IPO opportunity tied to a new approach to user monetization.
rHealth
rHealth is building a space-tested diagnostics platform designed to bring lab-quality blood testing closer to patients in minutes rather than weeks. Originally validated in collaboration with NASA for use aboard the International Space Station, the technology is now being adapted for at-home and point-of-care settings to address widespread delays in diagnostic access.
Backed by institutions including NASA and the NIH, rHealth is targeting the large global diagnostics market with a multi-test platform and a model built around devices, consumables, and software. With FDA registration in progress, the company is positioning itself as a potential shift toward faster, more decentralized healthcare testing.
Direxion
Direxion specializes in leveraged and inverse ETFs designed to help active traders express short-term market views during periods of volatility and major market events. Rather than long-term investing, these products are built for tactical use—allowing investors to take magnified bullish or bearish positions across indices, sectors, and single stocks. For experienced traders, Direxion offers a way to respond quickly to changing market conditions and act on high-conviction views with greater flexibility.
Immersed
Immersed is a spatial computing company building immersive productivity software that enables users to work across multiple virtual screens inside VR and mixed-reality environments. Its platform is used by remote workers and enterprises to create virtual workspaces that reduce reliance on traditional physical hardware while improving focus and collaboration. The company is also developing its own lightweight VR headset and AI productivity tools, positioning itself in the future-of-work and spatial computing space. Through its pre-IPO offering, Immersed is opening access to early-stage investors looking to diversify beyond traditional assets and gain exposure to emerging technologies shaping how people work.
Arrived
Backed by Jeff Bezos, Arrived Homes makes real estate investing accessible with a low barrier to entry. Investors can buy fractional shares of single-family rentals and vacation homes starting with as little as $100. This allows everyday investors to diversify into real estate, collect rental income, and build long-term wealth without needing to manage properties directly.
Masterworks
Masterworks enables investors to diversify into blue-chip art, an alternative asset class with historically low correlation to stocks and bonds. Through fractional ownership of museum-quality works by artists like Banksy, Basquiat, and Picasso, investors gain access without the high costs or complexities of owning art outright. With hundreds of offerings and strong historical exits on select works, Masterworks adds a scarce, globally traded asset to portfolios seeking long-term diversification.
Public
Public is a multi-asset investing platform built for long-term investors who want more control, transparency, and innovation in how they grow wealth. Founded in 2019 as the first broker-dealer to offer commission-free, real-time fractional investing, Public now lets users invest in stocks, bonds, options, crypto, and more—all in one place. Its latest feature, Generated Assets, uses AI to turn a single idea into a fully customized, investable index that can be explained and backtested before committing capital. Combined with AI-powered research tools, clear explanations of market moves, and an uncapped 1% match for transferring an existing portfolio, Public positions itself as a modern platform designed to help serious investors make more informed decisions with context.
AdviserMatch
AdviserMatch is a free online tool that helps individuals connect with financial advisors based on their goals, financial situation, and investment needs. Instead of spending hours researching advisors on your own, the platform asks a few quick questions and matches you with professionals who can assist with areas like retirement planning, investment strategy, and overall financial guidance. Consultations are no-obligation, and services vary by advisor, giving investors a chance to explore whether professional advice could help improve their long-term financial plan.
Accredited Debt Relief
Accredited Debt Relief is a debt consolidation company focused on helping consumers reduce and manage unsecured debt through structured programs and personalized solutions. Having supported more than 1 million clients and helped resolve over $3 billion in debt, the company operates within the growing consumer debt relief industry, where demand continues to rise alongside record household debt levels. Its process includes a quick qualification survey, personalized program matching, and ongoing support, with eligible clients potentially reducing monthly payments by 40% or more. With industry recognition, an A+ BBB rating, and multiple customer service awards, Accredited Debt Relief positions itself as a data-driven, client-focused option for individuals seeking a more manageable path toward becoming debt-free.
Finance Advisors
Finance Advisors helps Americans approach retirement with greater clarity by connecting them to vetted, fiduciary financial advisors who specialize in tax-aware retirement planning. Rather than focusing on products or investment performance alone, the platform emphasizes strategies that account for after-tax income, withdrawal sequencing, and long-term tax efficiency—factors that can materially impact retirement outcomes. Free to use, Finance Advisors gives individuals with meaningful savings access to a level of planning sophistication historically reserved for high-net-worth households, helping reduce hidden tax risk and improve long-term financial confidence.
© 2026 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
View Comments
- Is It Too Late To Consider Western Digital (WDC) After Its AI Storage Fueled Surge?
May 11, 2026
Never miss an important update on your stock portfolio and cut through the noise. Over 7 million investors trust Simply Wall St to stay informed where it matters for FREE.
If you are wondering whether Western Digital stock is still reasonably priced after its run, this article focuses squarely on what the current valuation is telling you. The stock last closed at US$515.83, with returns of 16.6% over 7 days, 50.2% over 30 days, 174.8% year to date, and a very large gain over the past year and multi year periods. Recent headlines have centered on Western Digital's role in data storage and infrastructure for AI related demand, as well as ongoing interest in the broader tech sector. These themes set the backdrop for the sharp moves in the share price and shape how investors think about potential rewards and risks. On Simply Wall St's valuation checks, Western Digital scores a 4 out of 6. Next you will see how different valuation methods frame that score, and later on a broader way of thinking about what the stock might be worth.
Western Digital delivered 1012.4% returns over the last year. See how this stacks up to the rest of the Tech industry.
Approach 1: Western Digital Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model projects a company’s future cash flows and then discounts them back to today to estimate what the business might be worth right now.
For Western Digital, the model uses a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is about $2.7b. Analysts provide explicit free cash flow estimates up to 2029, and Simply Wall St extrapolates those estimates so that projected free cash flow reaches $27.4b in 2035, all in $.
These annual cash flows are discounted back to today and aggregated to arrive at an estimated intrinsic value of about $1,001.92 per share for Western Digital stock.
Compared to the recent share price of $515.83, this DCF output suggests the stock is trading at about a 48.5% discount to that intrinsic value. This indicates a meaningful gap between the market price and this particular model’s estimate.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Western Digital is undervalued by 48.5%. Track this in your watchlist or portfolio, or discover 48 more high quality undervalued stocks.WDC Discounted Cash Flow as at May 2026
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Western Digital.
Approach 2: Western Digital Price vs Earnings
For profitable companies, the P/E ratio is a useful way to see how much you are paying for each dollar of earnings. It connects directly to what the business is generating today, which helps you compare Western Digital with other profitable stocks.
Story Continues
A “normal” or “fair” P/E typically reflects what the market is willing to pay given expectations for earnings growth and the perceived risk of those earnings. Higher expected growth or lower perceived risk often coincides with higher P/E ratios, while slower growth or higher uncertainty often fits with lower multiples.
Western Digital currently trades on a P/E of about 28x. That is above the broader Tech industry average of roughly 24x, but below the peer group average of around 44x. Simply Wall St also calculates a proprietary “Fair Ratio” for Western Digital of about 53x. This is the P/E it might trade on given its earnings growth profile, industry, profit margin, market cap and risk factors.
This Fair Ratio is more tailored than a simple industry or peer comparison because it folds in those company specific drivers instead of assuming all stocks deserve the same multiple. Compared with the current 28x P/E, the 53x Fair Ratio indicates that Western Digital is trading below that tailored estimate.
Result: UNDERVALUEDNasdaqGS:WDC P/E Ratio as at May 2026
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 19 top founder-led companies.
Upgrade Your Decision Making: Choose your Western Digital Narrative
Earlier there was mention of an even better way to understand valuation. Think of a Narrative as your story for Western Digital that ties together what the company is doing, how its revenue, earnings and margins might develop, and what you believe is a fair value. All of this sits inside an easy tool on Simply Wall St's Community page that is used by millions of investors and constantly refreshes when new earnings or news arrives. This allows you to compare your Fair Value to the current price and decide whether it looks more like the bullish US$440 view, the cautious US$226.76 view, or something closer to the analyst consensus of about US$371.70 for NasdaqGS:WDC.
Do you think there's more to the story for Western Digital? Head over to our Community to see what others are saying!NasdaqGS:WDC 1-Year Stock Price Chart
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include WDC.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
View Comments
- Semiconductor sector adds $3.8 trillion in market cap as AI demand broadens
May 10, 2026
Investing.com -- The global semiconductor industry has entered a massive "melt-up" phase, adding approximately $3.8 trillion in market capitalization over the last six weeks.
According to a report from the Wall Street Journal, the surge has expanded beyond specialized AI processors to include traditional CPUs and memory chips.
Intel shares have skyrocketed 239% this year, notching their first record in 26 years. Similarly, Sandisk shares have surged 558%, while the broader PHLX Semiconductor index recently achieved its strongest six-week performance since the peak of the dot-com era.
The current rally is underpinned by the "insatiable appetite" of AI companies for computing power, particularly for new agentic AI models that run 24/7.
The shift has created a "land grab" among the world’s wealthiest tech firms, leading to what Jonathan Cofsky, portfolio manager at Janus Henderson, describes as “banner profits for manufacturers.”
Unlike the speculative dot-com bubble, today’s gains are supported by significant earnings. For instance, Micron Technology is projected to generate $77 billion in operating profit this year, a stark reversal from its 2023 losses, as demand for memory chips consistently outstrips supply.
Despite the vertical move in stock prices, some analysts suggest valuations remain grounded due to unprecedented growth. Denise Chisholm, director of quantitative market strategy at Fidelity Investments, noted that “the anomaly right now is just how strong earnings growth has been.”
Micron, despite its massive surge, trades at just 8.9 times projected earnings, far below the S&P 500 average. However, the intensity of the move has some veteran investors feeling uneasy.
Peter Feinberg, a retired lawyer and long-term investor, described the gains as “a bit surreal,” noting that “the party is best about a half-hour before the police shut it down.”
While manufacturers race to expand capacity, persistent bottlenecks suggest shortages could last for years. Still, the memory of previous boom-bust cycles remains.
Steve Sosnick, chief strategist at Interactive Brokers, cautioned that the move has been “about as vertical a move as I can remember.” As investors weigh whether to trim holdings, Feinberg reminded himself that “the most dangerous words for an investor are ‘it’s different this time.’”
Related articles
Semiconductor sector adds $3.8 trillion in market cap as AI demand broadens
Goldman expects lower but still attractive stock market returns in 2026
Wolfe Research outlines eight risks that could spark stock declines in 2026
View Comments
- Western Digital's (NASDAQ:WDC) Shareholders Should Assess Earnings With Caution
May 9, 2026
After announcing healthy earnings, Western Digital Corporation's (NASDAQ:WDC) stock rose over the last week. While the headline numbers were strong, we found some underlying problems once we started looking at what drove earnings.
This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.NasdaqGS:WDC Earnings and Revenue History May 9th 2026
Zooming In On Western Digital's Earnings
As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company's free cash flow (FCF) matches its profit. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. This ratio tells us how much of a company's profit is not backed by free cashflow.
As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. That is not intended to imply we should worry about a positive accrual ratio, but it's worth noting where the accrual ratio is rather high. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".
Western Digital has an accrual ratio of 0.43 for the year to April 2026. Ergo, its free cash flow is significantly weaker than its profit. Statistically speaking, that's a real negative for future earnings. Indeed, in the last twelve months it reported free cash flow of US$2.9b, which is significantly less than its profit of US$6.35b. At this point we should mention that Western Digital did manage to increase its free cash flow in the last twelve months However, that's not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio.
Check out our latest analysis for Western Digital
That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.
How Do Unusual Items Influence Profit?
Given the accrual ratio, it's not overly surprising that Western Digital's profit was boosted by unusual items worth US$4.1b in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Western Digital's positive unusual items were quite significant relative to its profit in the year to April 2026. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.
Story Continues
Our Take On Western Digital's Profit Performance
Western Digital had a weak accrual ratio, but its profit did receive a boost from unusual items. On reflection, the above-mentioned factors give us the strong impression that Western Digital'sunderlying earnings power is not as good as it might seem, based on the statutory profit numbers. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 2 warning signs for Western Digital (of which 1 shouldn't be ignored!) you should know about.
In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
View Comments
- This new AI trade is leaving Nvidia and Micron in the dust
May 8, 2026
Nvidia (NVDA) and Micron (MU) have become two of the defining stocks of the AI boom. But a come-from-behind trade in old-school storage has outrun both, with Western Digital (WDC) and Seagate Technology (STX) leading the charge.
Since ChatGPT launched in November 2022, Western Digital and Seagate have outperformed Nvidia and Micron, according to Yahoo Finance data.Western Digital and Seagate Technologies have outperformed Nvidia and Micron since ChatGPT launch
The timing is key. The storage rally really took off in April 2025. Around the same time, Micron and the broader memory trade started to emerge as a central AI theme after the post-”Liberation Day” lows.
That’s not because storage and memory suddenly became sexier than GPUs. It’s because AI has turned the less glamorous parts of the hardware stack into scarcity trades.
The market is moving past the first AI winners and chasing companies tied to the physical demands of the infrastructure build-out: memory, storage, networking, foundry capacity, optical gear, and legacy chips.
The heat map tells the same story, with some of the biggest moves coming from names that were not the face of the AI trade even one year ago.AI trade heat map — since ChatGPT launched November 30, 2022·Yahoo Finance
The catch-up trade is showing up across the chip complex. Intel (INTC) is up roughly 200% since the March 30 low and just hit its fourth straight intraday record high following a report that Apple (AAPL) and Intel reached a preliminary chipmaking agreement.
Micron, meanwhile, is up roughly 130% since the March 30 low and has added roughly $470 billion in market value over that stretch. AMD (AMD) and SanDisk (SNDK) have also posted triple-digit rallies, while Lumentum (LITE) is riding a 13-month win streak.
Nvidia still dominates by size. The stock has added more than $1 trillion in market value since the March 30 low alone.
But the performance race has moved beyond the initial AI winners. The market is now paying up for the companies that can help relieve the bottlenecks created by the boom.
Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at jaredblikre@yahooinc.com.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
View Comments
- Why These Four Biotech Stocks Prove That Follow-On Entries Still Pop Up In Stock Market Leaders
May 8, 2026
Truth be told, a survey of leading biotech stocks currently in the IBD 50 actually accentuates the importance of using both daily and weekly charts in the same manner as, say, the mega-cap leaders such as Sandisk, Micron Technology, and Western Digital in the data storage segment. The concept also applies to other tech leaders such as Marvell Technology in application-specific integrated circuits, and Ciena, a fiber-optic data networking company. Marvell carries a $140 billion market cap, and Ciena is valued at $76 billion.
Continue Reading
