What happened
Shares of Micron (MU 3.06%) and Western Digital (WDC 4.28%) have gained as much as 5% and 7%, respectively, following positive research notes from Wall Street. Morgan Stanley reiterated overweight (equivalent to buy) ratings on both companies, while Cascend maintained a buy rating on Micron while raising its price target to $100.
So what
There has been a global shortage of chips within the semiconductor industry recently, and Morgan Stanley analyst Joseph Moore believes that their reduced availability will lead to increased memory prices.
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"A month ago, our checks were pointing us to a mixed view on commodity NAND – a consensus view that even as DRAM and other areas improved, NAND prices would fall by double digits in [Q1] on a like-for-like basis with continued downside into [Q2]," Moore wrote in a research note to investors. Looking on the upside, he noted:
But each passing day has brought new checks showing movement in a positive direction: first that prices would fall by less, then that prices would barely be down, and more recently we have heard selective reports of contract prices going up, particularly with smaller customers in areas such as client solid state drives.
Details regarding Cascend's price-target bump were not immediately available.
Now what
Moore warns that it's still unclear if the pricing levels are sustainable but is encouraged by the upward trends. The analyst believes that investor sentiment regarding Western Digital remains negative but argues that the stock offers compelling valuation within the sector. Micron could continue to enjoy multiple expansion from its product roadmaps, according to Moore.
