HDDs (STX, WDC): Toshiba's storm in a teacup

Toshiba announced plans to increase production capacity, which has been widely misquoted and misunderstood by the press. STX and WDC were both down 10% at the time of writing. Toshiba's release actually said it aims to "nearly double production capacity by FY2027." If Toshiba doubles EB output while WDC and Seagate each grow EB by 25%, Toshiba's EB share would rise from 11.2% to only 16.8% — far from the 30% market share reported in the press. The reported ~$380 million investment appears insufficient versus Toshiba's roughly $3.1 billion annual HDD revenue, and as the HDD technology laggard, areal density is the key execution risk. We see today's news as a storm in a teacup and would look to buy on this weakness. We reiterate Outperform on STX (top pick, PT $1,350) and Outperform on WDC, PT $770.