As Risks Climb, 2 Stocks With 30% to 90% Upside Are Becoming Market Darlings

Core Insights - Western Digital is experiencing significant growth driven by the demand for cloud computing and AI, with a 25% increase in revenue to $3.02 billion and a 78% increase in EPS to $2.13 in Q2 2026 [2] - The company is focusing on developing next-generation high-capacity drives, such as HAMR and ePMR, to meet increasing demand [1][4] - Western Digital's stock has appreciated 46% year-to-date, outperforming the S&P 500 Index, indicating strong investor confidence [3] Financial Performance - The company generated $653 million in free cash flow, returned $615 million through share repurchases, and distributed $48 million in dividends [1] - Gross margin expanded to 46.1% compared to 38.4% in the prior-year period, attributed to higher-capacity drives and disciplined cost management [2] - For Q3, the company expects 40% revenue growth and a 69% increase in adjusted EPS to $2.30 [7] Market Position and Outlook - Western Digital is valued at $93.3 billion by market capitalization and is seen as a long-term buy-and-hold stock due to rising demand and structural tailwinds [5][8] - The company has secured long-term purchase orders from its top seven customers, extending visibility beyond 2027 and 2028, which helps reduce earnings volatility [6] - Analysts forecast earnings to increase by 80% in fiscal 2026, followed by 52% growth in fiscal 2027, suggesting that the stock remains underappreciated [7] Industry Trends - The rapid growth of AI is significantly impacting cloud computing, leading to increased demand for data storage solutions [2][4] - The ongoing AI adoption and data generation are expected to drive substantial growth in storage demand, benefiting companies like Western Digital [6]