What happened

Shares of Western Digital (WDC -0.34%) rose 10.6% in November, according to data from S&P Global Market Intelligence. The company is one of just a handful of producers of hard-disk drives and NAND flash storage modules. Bucking the negative November trend in tech stocks, Western Digital rose after an analyst became more optimistic on memory demand heading into next year.

A hard disc against a black background.

Image source: Getty Images.

So what

Heading into November, Western Digital's stock had trended downward in a monthslong decline, as analysts grew concerned over softening demand trends for the holiday quarter. At the end of October, the company also reported earnings that included softer-than-expected guidance, leading to another drop at the end of October.

However, its fortunes changed in November after Mizuho analyst Vijay Rakesh upgraded Western Digital to buy, just one month after he had previously downgraded the stock to neutral.

Why the change of heart? According to his channel checks, Rakesh found demand for the first half of 2022 was improving above what he had previously forecast:

Our recent checks indicate the "ACTUAL" demand is improving across all three markets. ... We now see potentially better-than-expected pricing trends in 1Q22 and 2Q22. ... We believe 2H22 could see memory pricing stabilize further if PC build trends continue to outperform.

Now what

Western Digital was also spared the worst of the tech sell-off because it's a rare value stock in the tech world, and it trades at a low multiple of both earnings and book value. Based on next year's profit estimates, the stock trades at just 6.5 times earnings, even after last month's performance. Stocks trading at a low multiple of earnings might be less susceptible to rising rates, which will lower the value of earnings well out into the future, which affects growth stocks more.

True, the company largely sells commodity products that go through boom and bust cycles, but the chasm between its valuation and those of high-multiple software stocks is so large, investors may be kinder to companies like Western Digital in 2022 if we find ourselves in a rising-rate environment.