Western Digital's (WDC) vendors could be underestimating future customer needs as they gear up to deploy artificial intelligence applications over the next few years, setting the stage for the data-storage company to likely exceed market expectations, Wedbush said Thursday following the company's yearly investor day event.

Wedbush analysts Matt Bryson and Antoine Legault said they continue to believe Western Digital remains in a "very strong position" in 2025, with hard disk drives continuing to dominate a growing market and manufacturers working to adapt newer technologies such as heat-assisted and possibly heated dot magnetic recording.

The analysts said Western Digital should be in position to implement several shareholder friendly policies, rewarding investors and possibly working to increase multiples from current levels over time. For example, the company is expecting to soon begin a modest dividend that is "expected to grow significantly in the future" as Western Digital achieves its targets.

Western Digital's ability to execute its technology roadmap will dictate whether and how fast the company can realize its potential, the analysts said, as they noted that the company plans to shift to HAMR technology in late 2026 or 2027.

"It has become much harder to eke out areal density gains," they said, noting prior attempts at adopting new technologies often took more than one attempt. "We view the timing of WDC's roadmap as somewhat ambitious, though we would note the definition of successful execution in HDDs is often relative."

Wedbush reiterated an outperform rating, with a $95 price target for Western Digital stock.

Price: 67.76, Change: +0.48, Percent Change: +0.71