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New DRAM/NAND Data Neutral For Semiconductor Stocks Says Pacific Crest; Western Digital Still 'Favorite' Idea In 2016

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According to a new note from Pacific Crest analyst Monika Garg, the latest December PC DRAM and NAND pricing data is neutral for the market's biggest semiconductor stocks. Last month, DRAM pricing fell by 2 percent while NAND pricing fell by 2.4 percent.

This shouldn't overly concern Micron Technology, Inc. (NASDAQ: MU), Western Digital Corp (NASDAQ: WDC) or SanDisk Corporation (NASDAQ: SNDK) investors, Garg explains. Here's why.


"Weak PC DRAM pricing adversely impacts Micron. We see near-term risk to Micron due to lower PC DRAM pricing. However, in the medium to longer term, we believe lower DRAM capex and lower bit growth due to challenges in node transitions should help the supply/demand balance in the memory markets."

SanDisk/Western Digital

"We believe the deal makes strategic sense for both companies and would be very accretive. The combined entity should generate significant cash flows and would create a formidable vendor in the solid-state-drive (SSD) space. Per our estimates, after 12 to 18 months, the combined entity could generate more than $10.60 in EPS and more than $3.33 billion in cash flows."

Western Digital: 'Our Favorite Idea'

Additionally, the analyst says Western Digital is her "favorite idea heading into 2016," referencing a thesis first unveiled on October 21, 2015. At that time, Garg said the combination of both companies should generate "significant" cash flows.

The analyst's target on Western Digital is $100, nearly 70 percent above current levels.

Latest Ratings for MU

Mar 2018Credit SuisseMaintainsOutperformOutperform
Mar 2018Deutsche BankMaintainsBuyBuy
Mar 2018KeyBancMaintainsOverweightOverweight

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