Morgan Stanley Upgrades Micron, Sees Floor Now Under The Stock

In a report published Tuesday, Morgan Stanley analyst Joseph Moore upgraded the rating on

from Underweight to Equal-Weight, while raising the price target from $14 to $16, following reports of the company receiving an unsolicited bid. According to a WSJ report, China's Tsinghua Unigroup had made a $21 per share unsolicited bid for Micron. "We see several potential obstacles should such a transaction emerge, but can also see the rationale for it. We also continue to be cautious on DRAM fundamentals as we expect continued weakness across DRAM sub-segments, analyst Joseph Moore said. The bid had put increased focus on Micron's potential strategic value and made the risk/reward "more balanced," Moore added. In the report Morgan Stanley noted that such a bid was likely to face several potential obstacles such as the price being 40 percent lower than Micron's share price earlier this year, political ramifications of a Chinese company trying to buy an American DRAM manufacturer and the difficult DRAM fundamentals. Micron's global presence "would create particular complexities" with regulatory approvals required from the governments of the countries where the company had a substantial presence, the report pointed out. Moore believes that Chinese sovereign investment in Micron would be "a substantial negative for longer term memory supply and demand," citing that this would likely "lead to a high level of Chinese investment in new facilities."