Kai Pfaffenbach | Reuters
Shares of chipmaker Micron rose Monday following an upgrade from Goldman Sachs, which says it’s more bullish on memory chip stocks.
Shares jumped 3.67% on Monday 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 current levels.
“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 Sachs’ Mark Delaney said in a note to clients on Sunday.
Goldman said it had been “cautious” on near-term fundamentals of memory chip 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 expectations but full-year 2021 earnings per share will be 30% above estimates.
The firm raised its full-year 2019, 2020 and 2021 earnings per shares estimates.
—With reporting from CNBC’s Michael Bloom.