Western Digital shares rose in price due to the production shutdown

Data storage systems manufacturer Western Digital Corporation (WDC) rose 5.24% to $66.13 at auction on December 29. The reason was the message of one of the main competitors about the forced suspension of production. 

Samsung has announced that it to “adjust the work” of part production facilities in China due to problems with COVID-19. So, probably, we are talking at least about a decrease in production volumes. The total capacity of Samsung factories affected by the issue is about 15% of the total global production of NAND flash memory and 42% of all Samsung capacities. 

Therefore, the market reacted to the possible imminent decline in the supply of memory chips to the international market. A decrease in supplies could lead to shortages and higher prices for memory chips, which will improve Western Digital and Micron Technology Inc. (MU), which compete with Samsung in several key segments. 

Mark Miller, an analyst at The Benchmark Company investment firm, believes Western Digital will be the primary beneficiary of the current situation. The company has already seen positive dynamics against the background of the continuing rise in prices for memory chips. In addition, the development of cloud IT and the saturation of various equipment with innovative electronics are long-term trends that require an increasing number of data storage devices. 

Against this background, The Benchmark Company confirmed the recommendation to buy WDC shares and set a target price of $92. It should that while the shortage of memory chips is only a possibility. The decrease in supplies from Samsung factories may be temporary, and the accumulated inventory will ensure shipment in the required volumes. Nevertheless, the WDC quotes have received a positive impulse, and the growth of quotations may continue if there is still information about a reduction in supplies.