Micron Technology shares have extended their recent rally, as Wall Street analysts see growing evidence of strengthening demand for both NAND flash and DRAM memory chips.
Memory pricing is on the rise, driven by a combination of tight supplies and growing demand for memory chips in applications like 5G mobile phones, cloud computing servers, electric vehicles, and personal computers.
Wedbush analyst Matt Bryson on Monday repeated his Neutral rating on Micron (Ticker: MU) shares, but lifted his price target to $100, from $88. He expects a sharp acceleration in earnings when the company reports results for its fiscal third quarter ending in May. Micron is scheduled to report February quarter results on March 31.
“Our updated outlook is tied predominantly to better DRAM pricing, although the U.S. memory company should also benefit from an improvement in NAND fundamentals at the margin,” Bryson wrote in a research note.
The analyst incrementally increased his expectations for the second quarter, but thinks that it is the third quarter where he thinks higher DRAM prices kick in and drive an earnings spike.
Bryson also notes that Micron CFO David Zinsner is speaking on Wednesday at a virtual tech conference hosted by Morgan Stanley, and he thinks that could be preceded by an update from the chip maker on the outlook for the quarter.
Barclays analyst Thomas O’Malley on Monday raised his price targets for both Micron and Western Digital (WDC), which makes flash memory products as well as hard disk drives. O’Malley writes that the updates reflect a better pricing environment for both NAND flash and DRAM memories.
For Micron, he repeats his Overweight rating, taking his target up to $110, from $110. He maintains his Equal Weight rating on Western Digital, but lifts his target to $75, from $53.
O’Malley reports that spot pricing for DRAM has soared 57% over the last three months, while contract pricing was up 5% over the same span. That gap between spot and contract pricing, he says, is the largest in a decade — and should pull contract pricing higher. He sees contract prices up 15% in the second quarter. And he notes that NAND spot pricing continues to move higher, “contrary to the perpetual calls for a correction.”
Micron shares were up 3.8%, to $94.98, while Western Digital shares spiked 6.1%, to $72.74. Year to date, Micron shares are up 26%, while Western Digital shares have rallied 31%.
Write to Eric J. Savitz at [email protected]
