Micron (MU) Price Target Raised at Goldman Sachs on DRAM Demand; Analyst Maintains Neutral Rating (LRCX) (KLAC) (SNDK)

November 24, 2014 9:45 AM EST
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Price: $90.66 +0.43%

Rating Summary:
    37 Buy, 10 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 17 | Down: 13 | New: 41
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Goldman Sachs maintained a Neutral rating on Micron Technology (NASDAQ: MU) and raised its price target to $32.00 (from $29.00). Analyst James Covello noted improved DRAM demand.

"We raise our EPS estimates and price target on Micron (Neutral) to reflect solid DRAM demand on content/box, Inotera’s reported 3Q14 income, the buyback, and a weaker yen. We are now modeling about 1% DRAM undersupply in 2015 (from balanced prior). While supply has continued to grow faster than we were modeling (we now estimate Samsung’s bits will grow about 53% in 2014 vs. low 30% range initially), we believe demand has exceeded our estimates. Our new content estimates for phones, tablets and servers are now all modestly above third party forecasts to better reflect this," said Covello.

"We are now more constructive on Micron’s EPS near-term growth but we remain Neutral and prefer SNDK (Nasdaq: SNDK) as we believe the DRAM industry is over earning," he added. "We expect excess returns to continue to attract supply (creating upside risk to our 2015 base case supply estimate of 25% yoy). Specifically, we estimate DRAM EBIT margins averaged in the high 30%/low 40% range in 3Q14, and that commodity DRAM margins are in the 50% range at the leading suppliers, well above the NAND industry (where low returns and negative FCF for some participants could help limit supply growth) and one of the highest margin levels in all of semis. DRAM FCF margins are also significantly higher. We believe this partly explains why DRAM capex is up about 40% yoy in 2014E and tracking higher in 2015E."

Covello also raised his price target on CL-Buy rating Lam Research (NASDAQ: LRCX) to $91 (from $85), and reiterated a Sell rating on KLA-Tencor (NASDAQ: KLAC).

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 $34.30 yesterday.



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