Here’s Why Analysts Like These Two Chip Giants: Micron Technology (MU), Intel Corporation (INTC)

One top analyst sings Micron's praises despite concerns of DRAM pricing weakness; another analyst lifts expectations on standout Intel fundamentals.

Two of the memory chip sector’s leading giants have won positive investment recommendations from experts on the Street. Memory pricing trends on the horizon have one top analyst rooting for Micron Technology (NASDAQ:MU) success this year, whereas Intel Corporation (NASDAQ:INTC) fundamentals are so strong, an analyst is out lifting his bullish expectations. True, Micron has been bearing the brunt of falling NAND pricing apprehensions and Intel is clawing its way out of a security vulnerability debacle- but these bulls make strong cases for why investors should buy these stocks regardless.

Let’s dive in:

Micron Is Looking Stellar for 2H:18 Setup

Top analyst Vijay Rakesh at Mizuho this time last week was feeling upbeat on Micron after having hosted an encouraging series of investor meetings. Investors have been crying fears of oversupply to dipping NAND pricing, which resulted in a roughly 20% shave off the stock’s latest surges. Yet, one of Wall Street’s best performing analysts continues to see stability in DRAM memory supply pricing with stronger NAND for the back half of the year.

Angling for an even better back half of 2018, the analyst cheers “we remain buyers,” maintaining a Buy rating on MU stock with a price target of $70, which implies a close to 40% upside from current levels.

Keep in mind, “With supply being one of the most controllable aspects for OEMs, we believe 2H18-2019 DRAM will remain disciplined with very gradual balanced DRAM supply growth. Given Samsung’s challenges in OLED with lower capacity utilization (~40% now) and smartphone demand, we believe focus will be on maintaining DRAM/NAND profitability with stable to better pricing,” explains the analyst. Moreover, as far as the analyst is concerned, the big slice of DRAM pricing trend weakness simply is not connected to DRAM capacity add.

Rakesh concludes betting on solid DRAM pricing in the tail end of the year even as challenges crop up in the supply chain regarding OLED: “While there are concerns in the supply chain given Samsung’s DRAM capacity add, we believe 2H-2018 DRAM supply will be measured with stable to higher DRAM pricing. Given Samsung’s challenges in OLED with lower capacity utilization and smartphone demand, we believe focus will be on maintaining DRAM-NAND profitability with stable to higher pricing. We remain buyers of MU and WDC with the pullback as we see a stronger and more stable DRAM-NAND in 2H18.”

Vijay Rakesh has a very good TipRanks score with a 74% success rate and a high ranking of #14 out of 4,766 analysts. Rakesh yields 30.2% in his yearly returns. Investors who follow Rakesh’s recommendations on Micron stock earn an average of 59.5% in profits on the stock.

Micron is a Wall Street favorite, boasting a strong bullish camp, based on TipRanks data. Out of 22 analysts polled in the last 3 months, 18 rate a Buy on MU stock, 3 maintain a Hold, while just 1 issues a Sell. Notably, the 12-month average price target stands tall at $73.67, marking a healthy upside potential of nearly 46% from where the stock is currently trading.

Intel Gets a Bigger Vote of Confidence

Intel data-centric demand fundamentals just scored an even more bullish price target from already confident MKM analyst Ruben Roy. Giving kudos to INTC management team’s impressive execution, the analyst sees reasons to root for this chip giant in both the short-term as well as longer-term.

As such, the analyst reiterates a Buy rating on INTC while boosting the price target from $55 to $58, which implies a 13% upside from current levels. (To watch Roy’s track record, click here)

The short-term key points of investor attention from where Roy stands boil down to the competitive backdrop for both the PC and server arenas as well as security updates following the latest security bug scare. “We think INTC is well positioned to maintain its market share at the high end of the PC markets and we expect INTC to continue to benefit from its current server-cycle, especially as adjacencies ramp. With respect to security issues, while the topic has cooled a bit, INTC has been providing regular updates on its security specific blog and reiterated, in mid-March, expectations to ship hardware based updates for Xeon Scalable and Core processors during the second half of this year,” writes the analyst.

For the first quarter of 2018, the analyst is dialing up his expectations, tweaking his revenue forecast from $0.70 to $0.72 and revenue from $15,000 million to $15,100 million. Worthy of note, the INTC management has set its revenue guide for the first quarter to $15,000 million, give or take $500 million, and its EPS guide to $0.70, give or take $0.05. The Street is calling for $15,050 million in revenue from Intel and $0.71 in EPS for the quarter. “The delta in our model is mostly driven by slightly stronger expectations for DCG revenue,” adds Roy, who now bets on 20% year-over-year growth against his prior expectations of 17%. For the second quarter, Roy lifts his revenue projection from $15,750 million to $15,800 million while maintaining his EPS forecast of $0.82- also stemming from more confident DCG expectations.

Ultimately, “INTC management continues to execute well with its overall strategy, product road-map and with real-time events such as the security flaws that were uncovered last year and made public earlier this year. We expect management execution, coupled with broader end market trends, to drive multiple expansion, longer-term. In the near-term, we believe that end market trends, particularly in data-centric end markets, can support Q1 revenue and a Q2 outlook that are slightly above consensus,” contends Roy, likewise confident on the company’s “significant investments over the past several years” to fire up future accelerated gains.

The chip giant has mostly optimism circling from analysts on the Street, according to TipRanks analytics. Out of 28 analysts polled in the last 3 months, 18 are bullish on INTC stock, 7 remain sidelined, while 3 are bearish on the stock. With a return potential of nearly 8%, the stock’s consensus target price stands at $55.25.

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