The outlook for the chipmaker Micron Technology Inc (NASDAQ:MU) looks rosy as supply will stay tight and demand strong for dynamic random-access memory (DRAM) chips and interest in NAND flash memory chips will be equally robust, according to Baird Equity Research’s Tristan Gerra.
Gerra’s recent field trip to Asia encouraged him to reiterate his Outperform rating and US$100 price target on Micron shares, which are trading down 1.3% this afternoon at US$58.40.
In a note to investors, he projects that DRAM supply and demand will stay tight through the rest of the year and see 2% to 3% sequential price increases in the third and fourth quarters. Demand from data centers will remain a key catalyst driving revenue as their use of DRAM content is set to jump over 30% this year by Gerra’s estimate.
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On the NAND flash memory chip front, Gerra is modeling a 15%-20% price decline for the chips this year compared to 2017. But the cost of producing NAND flash memory chips is set to decline at a faster rate than pricing. “NAND-related revenue will benefit from continued price declines as NAND demand is highly elastic, in our view,” wrote Gerra in a note to investors.
Another positive for Micron is that sizeable jumps in memory content are expected in Chinese ODM smart phones, put out by Chinese manufacturers that design the products themselves. The introduction of gaming-centric smartphones in this arena also requires additional memory chips. “These phones are expected to double DRAM content from 3GB to 6GB, with NAND content of at least 64GB,” wrote Gerra. “This drives our assumption for over 20% growth in DRAM content in smartphones overall this year.”
Micron Technology is the world’s second-biggest memory chip supplier and its products include DRAM, NAND flash and NOR flash chips.