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Nov. 19, 2021, 4:38 p.m. EST

Micron stock notches best day in more than a year after Evercore analyst says ‘it is game on for memory’

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By Emily Bary

Two underperforming microchip names could be due for a rebound as memory industry trends improve, according to an analyst.

Evercore ISI’s C.J. Muse elevated Micron Technology Inc. /zigman2/quotes/205710729/composite MU -3.09% and Lam Research Corp. /zigman2/quotes/208077897/composite LRCX -5.34% to his firm’s “top picks” list Friday, arguing that both could benefit from the “green shoots” he’s seeing in the memory industry.

The PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX -3.09% is up 22.8% since the start of June, while Micron shares have lost 1.3% in that time and Lam shares have fallen 0.8%.

“But sitting here today it is clear that the tides are shifting, with pricing decline expectations into 1HCY22 becoming ‘less bad,’ estimates likely bottoming in 1H22, and green shoots arising from PC constraints elsewhere easing, and hyperscale capex spend likely improving before year end,” Muse wrote. “Thus, we think it is game on for memory.”

Muse noted that Nvidia Corp. /zigman2/quotes/200467500/composite NVDA -3.23% and Advanced Micro Devices Inc. /zigman2/quotes/208144392/composite AMD -2.77% shares have benefitted recently amid Facebook-parent Meta Platforms Inc.’s /zigman2/quotes/205064656/composite FB +0.45% plans to spend up on building the metaverse, or a virtual world where people can connect. “We would note [high-performance computing] does not work without DRAM, another important benefit and something we think investors have overlooked,” he wrote.

Micron shares rose 7.8% in Friday trading and to post their biggest single-day percentage gain since May 27, 2020.

Read: Facebook is spending more, and these companies are getting the money

Muse also thinks that Lam looks well-positioned heading into next year as a “more memory-levered” chip-equipment company. Lam could benefit from growth in NAND capital expenditures, gross-margin improvement and a lessening of supply-chain pressures, in his view.

“From an investor positioning perspective, we note investors are generally eager to get back into memory for anticipated outperformance in 2022 but are not there today,” Muse wrote. “So when the turn comes, we think it will be fast and furious.”

Lam’s stock rose 1.4% Friday, even as shares of peer Applied Materials Inc. /zigman2/quotes/209393259/composite AMAT -6.10% were off 5.5% after the company issued a downbeat earnings report an afternoon earlier, citing challenges from supply constraints.

/zigman2/quotes/205710729/composite
US : U.S.: Nasdaq
$ 90.00
-2.87 -3.09%
Volume: 19.04M
Jan. 19, 2022 4:00p
P/E Ratio
13.90
Dividend Yield
0.44%
Market Cap
$103.99 billion
Rev. per Employee
$688,814
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/zigman2/quotes/208077897/composite
US : U.S.: Nasdaq
$ 642.73
-36.28 -5.34%
Volume: 1.83M
Jan. 19, 2022 4:00p
P/E Ratio
21.70
Dividend Yield
0.93%
Market Cap
$95.60 billion
Rev. per Employee
$1.12M
loading...
/zigman2/quotes/210598361/realtime
US : Nasdaq
3,612.19
-115.05 -3.09%
Volume: 253,835
Jan. 19, 2022 5:16p
loading...
/zigman2/quotes/200467500/composite
US : U.S.: Nasdaq
$ 250.67
-8.36 -3.23%
Volume: 48.83M
Jan. 19, 2022 4:00p
P/E Ratio
77.32
Dividend Yield
0.06%
Market Cap
$647.57 billion
Rev. per Employee
$1.28M
loading...
/zigman2/quotes/208144392/composite
US : U.S.: Nasdaq
$ 128.27
-3.66 -2.77%
Volume: 69.83M
Jan. 19, 2022 4:00p
P/E Ratio
39.74
Dividend Yield
N/A
Market Cap
$159.32 billion
Rev. per Employee
$774,841
loading...
/zigman2/quotes/205064656/composite
US : U.S.: Nasdaq
$ 319.59
+1.44 +0.45%
Volume: 20.81M
Jan. 19, 2022 4:00p
P/E Ratio
22.82
Dividend Yield
N/A
Market Cap
$885.02 billion
Rev. per Employee
$1.92M
loading...
/zigman2/quotes/209393259/composite
US : U.S.: Nasdaq
$ 143.07
-9.29 -6.10%
Volume: 12.93M
Jan. 19, 2022 4:00p
P/E Ratio
22.31
Dividend Yield
0.67%
Market Cap
$135.37 billion
Rev. per Employee
$854,037
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