As previously reported, Morgan Stanley analyst Joseph Moore upgraded Micron (MU) to Overweight from Equal Weight with a price target of $73, up from $56, and upgraded Western Digital (WDC) to Overweight from Equal Weight with a price target of $88, up from $64. While he did not expect memory fundamentals to bottom this quickly, his checks make it clearer that customers are "building real conviction" that memory will tighten over the course of 2020, Moore tells investors. Memory prices started to stabilize six months ago, but the "notable difference" in mentality from memory buyers that he sees has belatedly convinced Moore that the pricing strength can persist, he added.

Sees Q4 revenue $3.6B-$3.8B, consensus $3.69B.

Reports Q3 GAAP EPS 34c. Reports Q3 revenue $3.46B, consensus $3.36B. "As evidenced by our excellent third quarter results, Western Digital continues improving through-cycle profitability and dampening business cycles by leveraging our strategy of developing a diversified portfolio of industry-leading products across a broad range of end markets," said David Goeckeler, Western Digital CEO. "We are in the early innings of unlocking the full potential of this company, and as industry supply and demand dynamics continue to improve, we will remain disciplined around our capital spending and focused on driving innovation and efficiency across our businesses. We are confident in our strategy and the actions we have taken to-date, which successfully position us to capitalize on the promising growth prospects that lie ahead."

Pre-earnings options volume in Western Digital is 1.4x normal with calls leading puts 7:5. Implied volatility suggests the market is anticipating a move near 6.2%, or $4.32, after results are released. Median move over the past eight quarters is 2.1%.