Shares of Western Digital fell more than 2.5 percent Friday after Bank of America Merrill Lynch downgraded the stock to "underweight" from "overweight."
The bank also cut its price target on the stock to $30 from $61, citing near-term risks for Western Digital's earnings due to the quick erosion of the hard disk drives market.
Bank of America said in a Friday note to clients:
"We could see further risk to numbers if (1) average selling price (ASP) for NAND Flash declines faster on competitive pricing, (2) the Japanese Yen gets stronger vs USD (i.e. higher NAND manufacturing cost), (3) our royalty renegotiation assumptions are not conservative enough (22% decline Y/Y), or (4) HDD demand continues to deteriorate."
The bank downgraded the stock a day after Western said it had completed the acquisition of SanDisk, which was first announced last year.
That said, BofA thinks that SanDisk's margins have likely peaked near term because of a number of factors, including the rising yen.
Over the past year, Western Digital shares have lost more than 60 percent of their value.
WDC in past 12 months
Disclosure: BofA is a market maker for Western Digital.