January 7, 2009, 9:57 am
Micron: UBS Upgrades To Buy; Stock Falls Anyway
Posted by Eric Savitz
UBS semiconductor analyst Uche Orji this morning upgraded Micron (MU) to Buy from Neutral, while maintaing his $5 price target. He says that, while the stock has rallied sharply in the last few weeks, the company should benefit from sharp cutbacks in DRAM supply “which we believe will help to stabilize and improve prices, especially for DRAM.” He notes that with DRAM prices still below cash costs, further cap reduction in 2009 is likely, “despite the possibility of a government bailout in Taiwan for memory companies.
While he sees operating margins at Micron benefiting from a stable/rising pricing environment, he concedes that “uncertain PC demand and the possibility of lower DRAM per box to offset sharp price increases are major risks to our upgrade.
Less enthusiastic about the stock this morning is Barclays Capital analyst Tim Luke He says reports that Samsung could cut memory cap ex by 50% in 2009 is encouraging for the sector. But he nonetheless contends that pricing may see downward pressure after the Chinese New Year “given subdued demand and high inventory levels.” With the stock having rallied 105% over the last 7 weeks, Luke writes that he remains Neutral on the stock given “a challenging memory environment, ongoing losses and high debt levels.” He maintains a $3 target on the stock.
Likely pressured by this morning’s Intel warning, MU is down 30 cents, or 8.7%, to $3.17. |
