Micron Looks Compelling Amid Tight DRAM and NAND Atmosphere

After attending back-to-back days of conferences delving into key memory original equipment manufacturers (OEMs) as well as cap equipment OEM reporting shows, Mizuho analyst Vijay Rakesh sees a buying opportunity at hand for Micron Technology, Inc. (NASDAQ:MU) stock.

As such, the analyst reiterates a Buy rating on shares of MU with a $38 price target, which implies a 26% increase from where the stock is currently trading. (To watch Rakesh’s track record, click here.)

Rakesh notes, “Our key takeaways from two days of key memory OEMs and some cap equipment OEMs reporting shows: 1) Hynix adding ~$1.3B to 2017 capex primarily to get inline DRAM industry bit growth, while NAND bit growth well below industry; 2) Samsung sees tight DRAM-NAND into 2H17 and is staying the course on capex, in line with prior expectations (any DRAM capacity is to offset tech migration capacity loss and adding Pyeongtaek NAND capacity); 3) LRCX noted memory orders stable in 1H, and JunQ DRAM orders dipped while NAND orders were stronger. We would be buyers on MU and WDC with the pullback here.”

TipRanks analytics demonstrate MU as a Strong Buy. Out of 16 analysts polled by TipRanks in the last 3 months, 13 are bullish on Micron stock, 2 remain sidelined, and 1 is bearish on the stock. With a return potential of nearly 38%, the stock’s consensus target price stands at $41.00.

Samsung Hits New Revenue Heights in Q2

Though Samsung just delivered one of its all-time greatest quarterly prints yesterday with operating income and gross margin surging to their top heights, BMO analyst Tim Long surveys the chip maker’s rising global status from the sidelines. Samsung’s second-quarter print matched its preannouncement at the beginning of July. However, even with a hint of caution, the analyst is getting increasingly optimistic on Samsung’s opportunity thanks to robust memory chip sale performance.

In reaction, the analyst reiterates a Market Perform rating on the stock while lifting the price target from KRW2,200,000 to KRW2,600,000. (To watch Long’s track record, click here.)

For the second quarter, Samsung posted a 20% year-over-year surge to KRW61.0 trillion, marking the chip maker’s record profit-earning quarter as a stand-out. Meanwhile, with operating income hitting KRW 14.1 trillion and gross margin reaching 23%, which Long cheers as “the highest ever,” Samsung has benefited from an upper hand asset with Semis coupled with improving Galaxy S8 shipments.

Long comments, “Memory continues to shine,” leading him to lift projections for EPS, taking 2017 estimates from KRW235.86k to KRW274.35k, and raising 2018 expectations from KRW245.12k to KRW283.55k.

In regard to surprising strength in Galaxy S8 performance, the analyst opines, “We believe some of the success can be attributed to the model being released later in the year and to the pent-up demand from the Note 7 recall. We expect competition to heat up dramatically in the second half of the year, owing to a highly-anticipated Apple iPhone launch. We believe Samsung will also face continued pressure from Chinese vendors in the mass market, where shipments declined in the June quarter.”

Ultimately, “1) 2018 CapEx will be significantly higher than 2017; 2) the company will expand capacity at the Pyeongtaek fab this year, though bit growth expectations do not change so we are unsure of the impact in the near term; 3) the company will consider converting some planar NAND to V-NAND but will need to further invest in capacity to maintain current capacity; and 4) next year Samsung may convert some of the planar NAND capacity to DRAM,” concludes Long.