Western Digital to fall 16%, sell it, Goldman Sachs says
Investors should sell Western Digital shares due to the secular decline of hard drives and the risk of flash-memory oversupply, according to Goldman Sachs, which lowered its rating on company to sell from neutral. "To the extent the stock trades higher on short-term events, we would use it as an opportunity to sell the stock given risks that we believe could pressure WD's business in the next few years," analyst Mark Delaney wrote in a note to clients Tuesday. "We expect HDD [hard disk drives] sales to decline secularly." Delaney lowered his Western Digital price target to $38 from $47, representing 16 percent downside from Tuesday's close. The analyst cited how the hard-drive business is 60 percent to 70 percent of Western Digital's sales and profits. He estimates hard-drive industry sales will decline 7 percent annually from 2015 to 2020. Moreover, Delaney sees oversupply in the flash-memory market next year as factory investment is forecast to rise 45 percent to 50 percent this year. He also sees long-term risk from China entering the market. "Chinese companies with backing from the government are attempting to enter the NAND [flash memory] market, which creates risk to industry supply/demand in the longer-term. We do not expect material NAND volume from a Chinese company until 2018 at the earliest," he wrote. As a result of the deteriorating trends, Delaney decreased his estimates of 2017 and 2018 fiscal-year earnings to a range of $3 to $4.55 per share from $3.15 to $5.27, which is now 25 percent to 30 percent below Wall Street consensus. — CNBC's Michael Bloom contributed to this story

The Western Digital logo is displayed on an external hard drive. Getty Images