note that it is an upgrade from gs on sndk. they were neutral before they paused coverage in may. now a buy rating and also pt upped.
Americas: Technology: Semiconductors Equity Research Resume on memory: Buy SanDisk, Sell Micron, Neutral on STEC We see balanced NAND supply/demand, but oversupply in DRAM Supply additions should remain measured in both NAND and DRAM into the end of 2011. However, we see continued weak PC demand resulting in DRAM oversupply through mid-2012. Despite meaningful NAND capacity additions by 1H2012E, we expect relatively healthy NAND supply/demand dynamics given strong demand growth in smartphones, tablets, and SSDs. Buy SNDK: Strong growth drivers, supply/demand balance into 2H We are resuming coverage of SanDisk with a Buy rating and a $55 price target. We believe the stock can trade higher over the next several quarters based on: (1) Tight supply dynamics in the NAND flash market through the end of 2011, (2) Strong secular demand drivers in smartphones and tablets, with smartphone unit growth of 57% and 36% in 2011/12 and tablet unit growth of 223% and 35% in 2011/12, (3) An improving market position in enterprise solid state drives (SSDs) post its recent acquisition of Pliant, and (4) Structurally higher profitability relative to peers given the strong royalty stream derived from SanDisk’s extensive patent portfolio. Sell MU: DRAM fundamentals still weak, little valuation support We are resuming Micron with a Sell rating and an $8 price target. We believe investors should sell the stock as: (1) The stock has significantly outperformed memory ASPs due to expectations for a pronounced DRAM pricing recovery that we believe are unwarranted, (2) We think the market is too optimistic on Micron’s gross margins, with the consensus GM flat or up qoq for each of the next 7 quarters, and (3) Micron is not yet well positioned to capitalize on strong growth in mobile DRAM for smartphones. Although we recognize Micron’s more diversified model should reduce future volatility, the combination of limited free cash flow in CY2011E and DRAM ASP pressure should drive the stock down from here. STEC: Solid valuation post pullback but competition an overhang We are resuming coverage of STEC with a Neutral rating and a $20 price target. We believe STEC remains well positioned in the rapidly growing SSD market, and the company is likely to retain a leadership position in the enterprise storage segment of the market. Although we believe STEC will continue to expand rapidly in this hyper-growth market, we think it is likely to lose market share as key customers develop second sources, and new competitors (such as SanDisk) enter the market with acquired technology.
James Schneider, Ph.D. (917) 343-3149 email@example.com Goldman Sachs & Co. James Covello (212) 902-1918 firstname.lastname@example.org Goldman Sachs & Co. Mark Delaney (212) 357-0535 email@example.com Goldman Sachs & Co. Gabriela Borges (212) 357-2692 firstname.lastname@example.org Goldman Sachs & Co