Shares of memory-chip maker Micron Technology (MU) jumped Wednesday after the company received an upbeat assessment from a Wall Street firm, while Advanced Micro Devices (AMD) rose after getting its own upgrade.
RBC Capital Markets analyst Amit Daryanani initiated coverage of Micron with an outperform rating and price target of 80. Micron rose 4.6% to close at 56.50 on the stock market today.
The memory chip market is healthy and fears of a down cycle are overblown, Daryanani said in a report to clients.
The markets for DRAM and Nand chips are “structurally different” today than in past cycles, he said.
For one thing, the number of competitors has shrunk. The number of DRAM manufacturers has gone from 15 to three in the last 20 years, making for a “sensible pricing environment,” he said. Only Micron, Samsung and SK Hynix now make DRAM chips.
“While we don’t think cycles are done, we do think they are inherently more muted and Micron is positioned to generate positive earnings per share and free cash flow under most down-cycle scenarios,” Daryanani said.
Separately, Mizuho Securities analyst Vijay Rakesh said in his note to clients Tuesday that Micron’s analyst day next week could provide a positive catalyst for the stock. He rates Micron as buy with a price target of 70.
On Monday, Stifel analyst Kevin Cassidy raised his price target on Micron stock to 101 from 95 and reiterated his buy rating.
DRAM prices are tracking ahead of estimates for the May-ending quarter, while Nand flash prices are in line with estimates, he said.
Also, the “Nand flash market is growing and far from collapsing as the bear case has it,” Cassidy said in a note.
AMD Upgraded To Neutral
Elsewhere in the semiconductor sector, Susquehanna Financial Group analyst Christopher Rolland raised his rating on Advanced Micro Devices to neutral from negative.
He changed his sentiment on the stock after AMD’s better-than-expected first-quarter results. AMD beat Wall Street’s targets for sales and earnings in the March quarter and guided much higher for sales in the current quarter.
Rolland also cited Ethereum cryptocurrency-mining trends and strong demand for AMD’s Ryzen and Epyc chips as reasons for the upgrade. If AMD gains share in PC and data-center processors, it would be a catalyst for the stock, he said.
AMD stock climbed 3% to finish the regular session at 12.82.
Microchip Deal Could Close Early
The deal has obtained antitrust clearances from Austria, China, Germany, Japan and the Philippines. It still needs approval from the Taiwan Fair Trade Commission and Microsemi shareholders, but those are expected, B. Riley FBR analyst Craig Ellis said in his note.
Microchip now expects the deal to close in late May to early June, a bit earlier than its prior early-June expectations, Ellis said.
China’s approval of the acquisition bodes well for other pending chip deals, Ellis said. They include Marvell Technology‘s (MRVL) purchase of Cavium (CAVM) and KLA-Tencor‘s (KLAC) acquisition of Orbotech (ORBK).
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