Analysts explain their bullish views on tech giant Apple Inc. (NASDAQ:AAPL) and memory-chip maker Micron Technology, Inc. (NASDAQ:MU), as Apple is rumored to be interested in acquiring a new music streaming service, Tidal, while Micron looks to improve on a disappointing earnings report. Let’s take a closer look

Apple Inc. 

Analyst Gene Munster of Piper Jaffray weighed in on Apple’s services revenue following the Wall Street Journal report that Apple is in talks to purchase Tidal. Tidal is a music streaming service which has seen big name artists like Kanye West and Beyonce exclusively share their music on it due its higher royalty payments relative to other services.

Tidal currently has over 4 million paying subscribers, compared to Apple Music’s 15 million. According to Munster, the purchase “would give Apple Music more access to exclusive hip-hop content.” Apple is trying to compete with Spotify, which currently has 30 million paid subscribers and 70 million free subscribers. The analyst expects the deal to be less than $500 million, well below Apple’s acquisition of Beats Music two years ago for $3 billion.

This rumored acquisition is part of a larger initiative by Apple to increase its services business. On its last earnings call CEO Tim Cook stated, “[Services] is an unbelievable asset for us, because our install base has grown quickly, we have also seen an acceleration in … what has become one of the largest service businesses in the world.” This past quarter, services accounted for 12% of Apple’s revenues, growing 20% y/y. Apple is trying to use its services businesses to make up for the recent decline it has experienced in its overall revenue, down 13% y/y.

Following this report, Munster maintained his Overweight rating for Apple with a price target of $153, marking an increase of 60% from current levels. Gene Munster has a success rate of 60% with an average return of 16% per recommendation.

According to TipRanks, out of the 38 analysts who have rated the company in the past 3 months, 82% gave a Buy rating, 16% gave a Hold rating and 2% gave it a Sell rating. The average 12-month price target for the stock is $123.16, marking a 28% upside from current levels.Screen Shot 2016-07-03 at 12.33.54 PM

Micron Technology, Inc.

Analyst Romit Shah from Nomura gave his take on Micron following its most recent earnings report. Shah recently upgraded Micron due to a belief that an improvement in DRAM ASPs would increase the company’s operating margins and EPS. Since his upgrade, Micron guided a revenue decline for the August quarter due to weak contract pricing. The analyst expects Micron’s guidance to improve within one period due to spot pricing.

Micron’s May report showed a 1% decline Q/Q in revenues and lower than expected EPS. Nonetheless, its DRAM segment showed strength with revenues increasing 9% Q/Q, “reflecting both lower ASP deterioration and higher shipment volumes.” However, its NAND revenues went down 15% Q/Q as a result of 3D NAND constraints.

Micron’s predictions for the mid-point of August’s quarter were lower across the board than Shah’s due to a “subdued DRAM pricing guidance, weakness in NAND as Micron transitions to 3D from planar.” Micron’s revenue guidance for the August quarter was$3.05 billion, a 5% increase Q/Q. The company guided a loss per share of between ($0.16) and ($0.24).

The analyst feels that “the weak contract pricing is temporary as spot/channel pricing has already turned positive in the last two weeks.” He predicts a better November guide due to more 3D NAND conversions and subdued expense growth.

Although the analyst is decreasing his EPS predictions to $0.17 from $0.27 in CY16 and from $0.83 to $0.56 in CY17, he believes investors should continue investing in the company and “accumulate on weakness.” Shah reiterates a Buy rating on shares and reduces his target price from $18 to $16, marking a 28% increase from current levels. The analyst has a success rate of 55% with an average return of 7.2% per recommendation.

According to TipRanks, out of the 20 analysts who have rated the company in the past 3 months, 75% gave a Buy rating, 15% gave a Hold rating and 10% gave it a Sell rating. The average 12-month price target for the stock is $15.47, marking a 23.76% upside from current levels.

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