Western Digital (WDC) shares setting up well in a multi-month flag under $75 and massive potential for upside as it continues the longer-term trend towards $90. Shares moved back above the 8- and 21-day MA on Friday and momentum starting to inflect higher and ready to run. WDC has seen a lot of bullish flows including buyers in the July $85 calls, June $75 calls, and January $110 calls recently in size.

The $22B company trades 8.75X earnings and 1.35X sales. WDC is coming off of a strong quarter with an improving outlook around pricing as demand for both storage and memory rises. They continue to see longer-term tailwinds from digital transformations, better operational focus, and efficiency. WDC is now in year two under their new CEO who has taken some bold moves so far to bring value into the name. In October, he announced an internal separation of their HDD and Flash businesses which many think could lead to a formal spin off. And now recently there was news as well that the company is pursuing Kioxia, the former Toshiba memory business, in a sizable deal that would make WDC far and away the leader in the space. Analysts have an average target for shares of $80 with a Street High $124. Loop Capital with a $90 PT and raising estimates on 4/30 citing the company’s monster Q3 earnings beat, key improving trends across both Flash and Hard Disk Drive business, and expectations to see improving demand in average selling prices and gross margins through 2021. Short interest is 1.9%. Hedge fund ownership rose 4.85%.

Trade to Consider: Long the WDC July $72.50 Calls for $4.75