Micron shares jump after Goldman upgrades the stock, gets more positive on memory chip industry

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Kai Pfaffenbach | Reuters

Shares of chipmaker Micron rose on Monday following an upgrade from Goldman Sachs, as the firm said it is more bullish on memory chip stocks.

Shares jumped 3.5% in pre-market trading after Goldman upgraded Micron to buy from neutral and raised its 12-month price target to $56 from $40. The new price target is 23% higher from here.

“We are now more positive on global memory stocks…we believe that Micron’s stock will trade more on memory pricing trends and intermediate term EPS expectations than FY20 earnings,” Goldman Sach’s Mark Delaney said in a note to clients on Sunday.

Goldman Sachs said it had been “cautious” on near-term fundamentals of memory chips companies because excess inventory would lead to weaker pricing in the near-term.

“We now believe that inventory at the memory companies…is being depleted faster than we previously expected. In addition, we continue to expect the underlying rate of production to fall below longer-term demand growth in 2020,” said Delaney.

Delaney said he expects Micron’s full-year 2020 earnings per share to be below Wall Street analysts expectations. However, the analyst expects full-year 2021 earnings per share to be 30% above Street estimates.

The firm raised its full-year 2019, 2020 and 2021 earnings per shares estimates.

—with reporting from CNBC’s Michael Bloom.

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