Micron Surges on BofA, Credit Suisse Ratings - Analyst Blog

Shares of Micron Technology MU increased 5.02% on Wednesday's trade after Bank of America (BofA) upgraded the company to ‘Buy' from ‘Underperform' citing favorable supply/demand metrics, stable price environment and its innovations in memory technology. Another firm, Credit Suisse, reiterated its ‘Outperform' rating on the semiconductor chip maker based on the ongoing strength in demand.

Notably, the shares of this memory chipmaker soared 148.1% over the last one year and 43.1% year-to-date. Strong revenue growth (120.4% in first-quarter 2014 and 97.6% in second-quarter 2014) has also kept investors interested in the stock.

The company is optimistic about supply/demand balance for DRAM and NAND memory chips in 2014, which should support prices. According to management, demand for DRAM and NAND is expected to increase in the mid 20% to 30% and high 30% to low 40% ranges, respectively, over the long term. We believe that this supply/demand scenario is a positive for the company.

Micron is expected to benefit from the strong demand for NAND flash-memory chips, used in smartphones and tablets. Driven by new tablets and greater adoption of solid state drive SSD, total demand in the NAND flash memory industry could surpass manufacturing capacity, leading to periodic shortage and higher pricing in the near term.

The strategic acquisition of Elpida which expanded Micron's wafer manufacturing capacity by approximately 45% making it the second-largest DRAM manufacturer after Samsung is also a positive.

Moreover, Micron's innovations in memory technologies, spanning DRAM, NAND and NOR Flash memory remain the growth catalysts, going forward. These are being widely used in the latest mobile computing devices as well as in consumer, networking and embedded products. We are also optimistic about Micron's SSD product launches that are in great demand for their advantages over traditional hard drives.

While it may not be easy for Micron to grab market share from SanDisk Corp. SNDK — a key player in the NAND segment — support from Apple AAPL and Intel Corp. INTC, its prime customers, could ultimately turn the situation in its favor.

Currently, Micron sports a Zacks Rank #1 (Strong Buy).