Morningstar

10 Stocks with the Largest Fair Value Estimate Increases During Q3 Earnings

Tech stocks dominate, with Alphabet, AMD, and Cloudflare among those with the largest valuation increases.

A view of Google Headquarters.
Tayfun Coskun/Anadolu via Getty
Securities in This Article
Cloudflare Inc
(NET)
Western Digital Corp
(WDC)
Alphabet Inc Class A
(GOOGL)
Advanced Micro Devices Inc
(AMD)
Alphabet Inc Class C
(GOOG)

Amid a strong quarter for earnings, Morningstar analysts have raised their fair value estimates for a wide range of stocks, with the largest increases seen among technology and utilities companies. Among the names with the biggest valuation bumps were hard disk drive suppliers SanDisk SNDK and Western Digital WDC.

Across the 840 US-listed stocks covered by Morningstar, there was a 2.5% average increase in fair value estimates during the third quarter earnings season, slightly below the prior quarter’s 2.7% increase.

Among the stocks screened for valuation changes, 11.5% saw increases of 10.0% or more—higher than the second quarter’s 9.4% rate and the highest rate in four years. Over the past 10 years, 7.7% of the group had average quarterly fair value estimate increases of 10.0% or more.

The utilities and technology sectors saw the highest rate of increases. Roughly 18.9% of utilities stocks saw a fair value increase of at least 10.0%, and the average increase was 4.5%. Among tech companies, 18.8% had fair value increases of at least 10.0%, and the average increase was 4.8%.

Here are the stocks with the largest percentage increases in their fair value estimates:

  1. SanDisk SNDK: $135 from $40
  2. Western Digital WDC: $165 from $82
  3. Advanced Micro Devices AMD: $270 from $155
  4. Seagate Technology STX: $250 from $149
  5. BridgeBio Pharma BBIO: $65 from $41
  6. Shoals Technologies SHLS: $6.50 from $4.50
  7. United Airlines UAL: $62 from $43
  8. Alphabet GOOGL/GOOG: $340 from $237
  9. Reddit RDDT: $200 from $140
  10. Cloudflare NET: $185 from $130

Here’s what Morningstar analysts had to say about each stock.

SanDisk

“Sandisk’s September-quarter results crushed guidance, with sales rising 23% year over year to $2.3 billion. December-quarter guidance was even more impressive, calling for 13% sequential sales growth and 1,200 basis points of sequential gross margin expansion.

“Guidance blew our model out of the water. Sandisk is benefiting from an immensely positive NAND pricing cycle, which is driving terrific results. We’d expected a short-term upcycle, but the magnitude of the cycle appears far greater than what we’d modeled.

“We raise our fair value estimate for no-moat Sandisk to $135 per share, from $40, as we bake in a significantly stronger upcycle in the next two years. With the stock having quadrupled since August, we still see shares as overvalued.”

—William Kerwin, senior equity analyst

Read Kerwin’s full take on SanDisk here.

Western Digital

“Western Digital’s first-quarter fiscal 2026 revenue grew 27% year over year to $2.8 billion, 89% of which were cloud-related sales. Non-GAAP gross margin expanded 660 basis points year over year to 43.9% while non-GAAP operating margins expanded 1,200 basis points to 30.4%.

“Artificial intelligence’s insatiable demand for storage capacity is creating a perfect environment for hard-disc drives. Exabytes shipped are growing 30% for nearline drives, while higher-capacity ePMR drives continue to make up a greater mix of overall sales.

“We are materially increasing our fair value estimate for no-moat Western Digital to $165 from $82. This puts us firmly in the “new normal” cap, and if AI demand and pricing remain this strong past 2027, we could even see upside from here.”

—Eric Compton, director of equity research

Compton has more about Western Digital here.

Advanced Micro Devices

AMD saw two fair value bumps during the quarter. The most recent, to $270 per share from $210, came after the company’s investor day. “AMD hosted an investor day with updated revenue growth and financial targets,” wrote senior equity analyst Brian Colello. “These include growth in the next three to five years of 80% in data center AI products, 60% in all data center products, and 35% for total AMD. AMD’s adjusted gross margin target is now 55%-58%, ahead of 54% currently. AMD increased its bullishness on the artificial intelligence market, both in total (targeting a $1 trillion-plus market by 2030) and for the company (expecting 10%-plus market share). This implies $100 billion in AI revenue for AMD over the next three to five years, which exceeds our expectations.”

Earlier in the quarter, Colello raised AMD’s fair value to $210 per share from $155 following news of the firm’s deal with OpenAI. “AMD and OpenAI reached an agreement where AMD will supply artificial intelligence gear for up to 6 gigawatts of OpenAI’s AI infrastructure,” he wrote. “AMD expects the deal to earn tens of billions of dollars of annual incremental revenue with the rollout starting in second-half 2026. We’re highly encouraged with this deal for AMD as it validates its AI technology and significantly boosts its future AI revenue and profits. AMD hinted at the potential for ‘well over $100 billion’ in future revenue.”

Read Colello’s full take on Advanced Micro Devices here.

Seagate Technology

“Seagate’s fiscal 2026 first-quarter revenue grew 21% year over year to $2.63 billion, 80% of which were data center sales. Non-GAAP gross margin expanded 680 basis points year over year to 40% and non-GAAP operating margin rose 860 basis points to 29% on rising adoption of higher-density drives.

“Growing demand for storage, particularly for artificial intelligence-generated media content, is driving high demand for Seagate’s nearline drives. High demand and ramping higher-capacity Mozaic 3+ and 4+ terabyte drives are leading to margins the company hasn’t seen in over 10 years.

“We are materially increasing our fair value estimate for no-moat Seagate Technology to $250 from $149. This puts us firmly in the ‘new normal’ camp, and if AI demand and pricing remain this strong, we could even see upside from here.”

—Eric Compton

The rest of Compton’s take on Seagate Technology can be found here.

BridgeBio Pharma

BridgeBio saw its fair value hiked twice during the quarter. The most recent hike, to $65 per share from $59, came after the company reported earnings. “BridgeBio reported net revenue of $120.7 million in the third quarter, driven primarily by $108 million in Attruby sales,” wrote equity analyst Rachel Elfman. “BridgeBio showcased strong pipeline momentum this quarter, supported by positive late-stage data across two rare-disease programs. However, commercial investment supporting Attruby’s launch and market expansion efforts weighed on near-term profitability, which drove the EPS miss.”

Earlier in the quarter, Elfman raised BridgeBio’s fair value to $59 per share from $41 following positive phase three results for one of its drug candidates, BBP-418. “BBP-418 is an investigational oral therapy for limb-girdle muscular dystrophy, a rare muscle disorder with no approved treatments,” Elfman wrote. “The drug demonstrated meaningful improvements in both motor and pulmonary function, with no new or unexpected safety findings observed. If BBP-418 receives regulatory approval, it would be the first-to-market therapy for this indication and would face virtually no competition since there are no other late-stage programs currently under development.”

Take a deeper dive into Elfman’s outlook for BridgeBio Pharma.

Shoals Technologies

“Shoals reported third-quarter revenue of $136 million and EBITDA of $32 million. Full-year revenue guidance was increased to the high end of the prior range, while EBITDA guidance was largely unchanged.

“Shoals’ third-quarter results and updated guidance were broadly constructive, but the biggest positive from the print was backlog momentum. Backlog and awarded orders were $721 million at quarter-end, up 21% sequentially. This equates to a 1.4 times book-to-bill in the period, pointing to a continued revenue recovery in 2026.

“Shoals’ long-term strategic plan calls for expanding beyond the domestic utility-scale solar market. Investors have been particularly interested in the upside opportunity from its battery storage offering within the data center market.”

—Brett Castelli, equity analyst

Castelli has more about Shoals Technology stock here.

United Airlines Holdings

“United earned 11% less operating profit on 2.6% more revenue and 7.2% more capacity in the third quarter compared with 2024. Salaries increased 5.4% since last year, while United’s fuel expense was flat. Premium cabin sales rose 6% versus 2024, while basic economy revenue rose 4%.

“United is doing well, having established similar premium segmentation and loyalty offerings as Delta DAL’s, and as long as its premium customers remain loyal and not too frugal, we think these airlines can continue to prosper, sharing the bulk of industry profits.

“We have increased our fair value estimate for no-moat United’s shares to $62 from $43, reflecting a few offsetting adjustments to our forecast, including a higher forecast for fuel cost offset by higher revenue yields since airlines generally pass the cost of fuel on to customers.”

—Nicolas Owens, equity analyst

Investors can find more of Owens’ take on United Airlines Holdings here.

Alphabet

Alphabet saw two fair value increases during the quarter. The most recent, to $340 per share from $300, came after the firm reported earnings. “Alphabet reported solid third-quarter earnings with sales growing 16% to $102 billion and adjusted operating margins expanding 160 basis points to 34%,” wrote equity analyst Malik Ahmed Khan. “Google Cloud continues to fire on all cylinders, accelerating sequentially to 34% growth in the quarter, constituting 15% of total sales. Alphabet’s execution on artificial intelligence, evidenced by strong traction for its Gemini app, which has more than 650 million monthly users, along with its ability to deliver solid advertising revenue, continues to drive results while refuting the AI-led disruption narrative.”

Earlier in the quarter, Khan bumped up Alphabet’s fair value to $300 per share from $237 following the company’s deal with Anthropic. “Anthropic announced a material expansion of its use of Alphabet’s AI accelerators,” wrote Khan. “The deal, worth tens of billions of dollars, includes the use of Alphabet’s tensor processing units as well as traditional Google Cloud services, with more than 1 gigawatt of power coming online in 2026. We believe Anthropic’s multibillion-dollar commitment is a vote of confidence in Alphabet’s TPUs as well as a material revenue driver. As artificial intelligence labs hunt for capacity, we see TPUs only growing in importance.”

Khan has more about Alphabet stock here.

Reddit

“Reddit delivered a solid third quarter, as revenue grew 68% year over year to $585 million, on the back of strong monetization and healthy user growth. Adjusted EBITDA margins exceeded consensus expectations, clocking in at 40%, helping Reddit achieve its 2024 IPO margin targets.

“We’ve observed the quality and breadth of ads improve each quarter, which is a direct function of Reddit’s continued investments in ad targeting and automation. This is attracting advertisers who are getting better returns on their ad spending, helping Reddit reap higher average revenue per user.

“We raise our fair value estimate for narrow-moat Reddit to $200, up from $140, to give credit to its monetization potential and margin profile. With shares up 10% on the earnings release, we see the stock as fairly valued.”

—Malik Ahmed Khan

Read Khan’s full take on Reddit here.

Cloudflare

“Cloudflare reported solid third-quarter results with the firm’s sales growth accelerating to 31% while its adjusted operating margins expanded 50 basis points to 15.3%. The firm’s channel partner sales spearheaded the top line, growing 68% year over year, making up 27% of total sales in the quarter.”

“Cloudflare’s business is firing on all cylinders. We particularly like the firm’s continued march upmarket, with sales from large customers, defined as those spending more than $100,000 on the firm’s products, growing 42% and constituting 73% of total sales.”

“We are raising our fair value estimate for narrow-moat Cloudflare to $185 from $130 primarily due to an increase in our top-line projections for the firm. Despite our material fair value estimate hike, we continue to view shares as overvalued.”

—Malik Ahmed Khan

Take a deeper dive into Khan’s outlook for Cloudflare.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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