SanDisk Corp. (NASDAQ: SNDK) and Micron Technology Inc. (NASDAQ: MU) have enjoyed great recoveries from the lows of 2012. Stern Agee has a very positive analyst report of stocks to buy as the run in DRAM and NAND may still have lots of room to run. The firm’s Vijay Rakesh discussed PC memory and noted that NAND supply is constrained and PC-DRAM supply is down, both of which have positive implications for investors of these companies.
Source: thinkstock
The firm’s checks on DRAM show that supply continues to be constrained as DRAM suppliers have continued to allocate DRAM capacity away from PC-DRAM to Mobile-Server. So even with PC builds being down 15% to 18% month over month for April, PC-DRAM prices were up 2% to 5% for April. The firm thinks PC-DRAM pricing could continue to trend up this quarter. Stern Agee also noted that DRAM inventory at the card OEMs is still fairly low in the five to six week range.
Today’s report also goes into NAND pricing and demand. NAND supply remains constrained and the supply chain has very little incremental capacity coming on. The NAND space has gone through a consumer handset/tablet market for almost six to seven months after holiday builds peaked. NAND pricing has risen substantially in the past six months and Stern Agee thinks that near-term NAND pricing will be stable and that some subsequent NAND pricing actually will strengthen into June and July when some of the iconic tablet and iPhone builds start to ramp up.
Rakesh said, “We believe MLC NAND continues to be in tight supply. Low density NAND pricing has been softer but is also expected to strengthen.” Both SanDisk Corp. (NASDAQ: SNDK) and Micron Technology Inc. (NASDAQ: MU) have Buy ratings at Stern Agee. Micron’s price target from Stern Agee is above average at $12, versus a consensus target price of $11.64. The firm’s SanDisk’s price target is $70, versus a consensus price target of $64.79.
Rakesh said:
Our checks in the Memory supply chain indicate that PC-DRAM supply continues to be constrained. Even with PC builds tracking down 15-20% month over month into April and soft into May as well, PC-DRAM pricing continues to move up. We believe unlike some concerns there is not much DRAM inventory in the channel either. Also NAND supply continues to be constrained and we believe NAND pricing could strengthen in June/July when seasonal consumer phone and tablet builds resume.
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