Tuesday, September 20, 2011
Goldman Sachs analyst James Schneider this morning lifted his rating on memory chip maker Micron Technology to Neutral from Sell, noting that the DRAM industry is responding to weaker demand with significant production cuts. The moves, he writes, are ¡°key to stabilizing prices and profitability.¡±
Schneider lifted his price target on the stock to $6.50, from $5.50, still below the current price.
Schneider thinks the DRAM industry can return to a balanced supply/demand environment in 2012, as long as the announced cuts ¨C about 11% of industry supply ¨C are actually completed, and if PC growth in 2012 hits his current estimates for 6% unit growth.
The upgrade is not exactly a reason for bulls to jump for joy.
¡°We would stop short of buying the stock today, as we believe there still needs to be further DRAM production cuts or stronger PC demand to drive significant price increases and restore meaningful profitability to Micron¡¯s business,¡± he writes. ¡°Until then, we believe the DRAM business is likely to remain a drag on the P&L. We believe that even post these supply cuts, Street estimates need to come down significantly ¨C and our new CY2012 estimate is still 20% below the Street.¡±
He notes that the stock is down 22% since it was added to Goldman¡¯s sell list in June.
The Goldman analyst adds that he would advise investors looking for memory sector exposure to instead buy shares of SanDisk, as pure play bet on NAND flash memory.
By: DocMemory
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