SanDisk +3.1% on Goldman upgrade; Micron +1.1%
- Citing a more favorable valuation and expectations of a favorable 2015 NAND flash supply/demand balance, Goldman's Mark Delaney has upgraded SanDisk (NASDAQ:SNDK) to Conviction Buy, and hiked his target by $6 to $106.
- Delaney: "Low 2H14 NAND [chip equipment] orders imply supply growth will be reasonable for at least the next two quarters (there is a two quarter lag between orders and output), and demand should pick up from a seasonally slow 1Q (aided by higher NAND per phone)." He sees margins (under pressure lately) improving by 400 bps by Q4 with the help of a weaker yen and SanDisk's 15nm NAND production ramp.
- Delaney also sees SanDisk recently-launched enterprise flash storage array potentially driving long-term upside, and thinks concerns about the 2016 impact of 3D NAND adoption are overblown. "While this is a risk to monitor, we expect a reasonable ramp due to high capex requirements (3D requires 2X the tools as 2D), relatively high cost/bit for early 3D chips, and the fact that early 3D output is planned for SSDs (SSDs for OEMs need to be qualified, implying a delay from initial 3D output to volume ramp)."
- Micron (NASDAQ:MU), which fell 3.7% yesterday amid a market selloff and is down 21% YTD, is getting a lift from the upgrade. NAND accounted for 28% of Micron's November quarter sales.
- Morgan Stanley reported positive NAND checks two weeks ago.
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