Goldman Sachs is warning investors to not believe in the sharp rally in memory and hard-disk-drive (HDD) stocks so far this year.
The firm’s analyst Mark Delaney reiterated his Neutral ratings for both
(ticker: MU) and
(WDC) shares, citing falling chip prices this quarter.
“Our recent industry discussions suggest that memory fundamentals remain very soft, and prices continue to decline,” he wrote on Thursday. “We believe that the memory and HDD stocks could give back some of the recent stock gains if memory fundamentals are weak and investor expectations for the slope/timing of a recovery moderate.”
Shares of Micron and Western Digital have risen more than 20% year-to-date.
The analyst said his recent conversations with industry contacts pointed to another 20% to 25% decline in memory prices during the first quarter, along with an about 20% drop in flash-memory prices. He noted the memory-chip sector is only in the second quarter of its current downturn, compared to historical downturns that typically last about six quarters.
He maintained his $38 price target for Micron and $42 price target for Western Digital, and lowered earnings-per-share estimates for both companies through fiscal 2021.
Micron shares were down 2.1% to $38.54, while Western Digital stock was down 1.1% to $45.34.
Micron and Western Digital did not immediately respond to a request for comment on Delany’s report.
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