US President Trump’s announcement that he is suspending new tariffs on Chinese imports and is removing the prohibition of US technology sales to Huawei is a fantastic sign for Western Digital (WDC) and others in the semiconductor and memory space. With trade talks back on and a tangible gesture from Trump that he wants to strike a deal, the overhang over the sector may soon be clear.

There are $300B of additional goods that Trump planned on slapping tariffs on before his suspension announcement. Perhaps more importantly for Western Digital, Trump effectively took Huawei off the entity list, which bans the shipment of US technology equipment to the list of companies. WDC and others will now be allowed to sell equipment where there is no great national security problem to Huawei. Trump indicated that both the US tech companies and Chinese President Xi Jinping requested that Huawei be lifted from the list.

In the wake of announcement, Mizuho analyst Vijay Rakesh upgrades Western Digital stock to Buy from Neutral, while raising the price target to $55 (from $47), which implies nearly 12% upside from current levels.

As always, we like to give credit where credit is due. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Rakesh has a yearly average return of 20.1% and an 62% success rate. Seymore is ranked #26 out of 5,192 analysts.

WDC and other memory OEMs have been under pressure recently with low NAND pricing and high inventory. The Huawei news means that demand will be driven higher with a large buyer back in the market, which Rakesh believes will drive an “incremental 50-70M handset builds and shipments into 2H19.” As a result, Rakesh believes that NAND pricing for the next three quarters to be down 3%/3%/4% respectively rather than 5%/4%/5%. Rakesh notes that pricing “could stabilize faster if we see a demand mean reversion.” This softening of the NAND pricing drop should benefit WDC through the rest of 2019 and into early 2020.

However, some strategists are not as confident in the long-term viability of a US/China trade deal. The overhang can only be fully lifted once a comprehensive deal has been struck, and that has not happened yet. This is an important first step, but it should not be taken for more than a gesture of good-faith by President Trump towards his Chinese counterparts. There is a long way to go in these negotiations.

Overall, the announcements Trump made on the US/China trade relationship is a positive sign for Western Digital, and analysts are confident it can help propel the stock. Wall Street sizes up WDC as a ‘Moderate Buy’ stock, as the bulls edge out the cautious on the chip giant. In the last 3 months, WDC has received 11 bullish ratings versus 5 analysts hedging their bets, and two bears who doubts the company can secure a turnaround. The average price target on WDC is $55.53, which implies about 13% upside from where the stock is currently trading. (See WDC’s price targets and analyst ratings on TipRanks)