Micron, Western Digital in Mizuho's sights in mixed memory chip market
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The outlook for the memory chip market continues to be mixed with demand for such semiconductors used in servers remaining strong, but the PC and handsets continue to show signs of weakness heading into the second half of the year.
That's the assessment of Mizuho Securities analyst Vijay Rakesh, who said that servers remain "the only bright spot" driving demand for memory chips at the current time. For PCs and mobile phones, the situation is more than a little negative due to a combination of factors that are continuing to weigh on the sector.
Rakesh said that data from chipmakers in Asia indicates that PCs and handsets are "suffering from high memory inventory" that has also dragged down pricing in various types of memory technology. According to Rakesh, pricing trends have "softened considerably" in the last month as weaker trends in PCs and handsets, along with concerns about consumer demand, have all added up to create "negative sentiment" toward memory chipmakers.
However, Rakesh also said that the current situation provides an opportunity for investors to "step in" with the right opportunities.
As such, Rakesh said from Micron Technology (NASDAQ:MU) and Western Digital (NASDAQ:WDC) stand out for their "strong execution", and likelihood to benefit from expansion in the 5G mobile-phone market. Rakesh left his buy ratings on both companies' shares unchanged, but cut his price target on Micron (MU) to $95 a share from $113, and trimmed his outlook on Western Digital's (WDC) stock to $68 a share from $72.
Micron (MU) shares rose 2.5%, and Western Digital (WDC) was up by 1.7% in early trading Tuesday.
Last week, Summit Insights Group analyst KinNgai Chan cut his rating on Micron (MU) to hold from buy on the grounds that the memory chip market is likely to remain sluggish for the rest of the year.