Micron Technology beat analysts' forecasts in its third-quarter earnings and said it sees a solid rebound in memory demand over the second half of the year.
"On Micron's earnings call yesterday the company stated they are beginning to see signs of improvement with the NAND industry benefiting from price elasticity kicking in," Schwab wrote. "The company stated that customer inventory levels improved across most end markets. While seeing signs of improvement the company also still announced further steps to help return the industry to a healthy supply/demand balance."
There are risks investing in Western Digital, Schwab wrote, noting that the hard drive industry is characterized by declining average selling prices. Future increases about the historical trend in the rate of average selling price erosion "could have an adverse effect on profitability," he wrote.
Schwab said he is keeping his fiscal 2019 revenue and earnings estimates for Western Digital unchanged at $16.57 billion and $4.86 a share, respectively. He also will leave unchanged his 2020 revenue and earnings estimates of $15.99 billion and $3.24 a share, respectively.