Goldman Sachs Keeps Neutral Rating on Micron Technology (MU); Analyst Sees Supply Side Risk

Goldman Sachs maintained a Neutral rating on Micron Technology (NASDAQ: MU). Comments follow an announcement Samsung plans to invest $14.6 to $14.7 in a new semiconductor fab in South Korea. In the view of analyst Mark Delaney, if DRAM margin remains highs then new supply will come online.

"We believe Samsung’s announcement is supportive of our view that if DRAM margins remain significantly higher than other areas of semis, then new supply will come online (we estimate commodity DRAM EBIT margins have reached 40-50% at leading suppliers). As we have written previously, this supply could come from: 1) New fabs (note that Samsung’s Line 17 and Hynix’s M14 are both scheduled to ramp in 2015); 2) Foundries (note that Kingston sources DRAM from Powerchip); 3) Shrinks that occur more quickly than the market is expecting (Samsung for example plans to grow DRAM bits in the high 40% range yoy for 2014 vs. the 30% range initially); 4) Conversions to DRAM (some NAND manufacturers have low or negative NAND EBIT margins and could eventually switch wafers to DRAM if margins remain much higher. However, we do not expect this in the near-term as NAND makers are focused on growth with 3D NAND and SSDs)," said Delaney.

"We remain Neutral on Micron. While we continue to be concerned with intermediate to longer-term supply side risks, solid DRAM demand from both servers and handsets in the near-term keeps us Neutral rated," he added.

For an analyst ratings summary and ratings history on Micron Technology click here. For more ratings news on Micron Technology click here.

Shares of Micron Technology closed at $32.57 yesterday.

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