Investing.com - Micron (NASDAQ:MU) rallied Tuesday as Cowen upgraded its outlook on the chipmaker on expectations that a turnaround in the memory market may arrive sooner than many expect.
Cowen upgraded its rating on Micron (NASDAQ:MU) to outperform from market perform and lifted its price target on the stock to $70 from $50. Micron shares surged 7%.
In its fiscal fourth-quarter, Micron reported a 35% plunge in revenue year on- ear as a glut in the supply of random-access memory (DRAM) chips pressured prices, keeping a lid on the chipmaker's growth.
But the woes in the memory market may clear up sooner than many expect, placing the chipmaker in pole position to leverage its improved cost position relative to its peers, Cowen said.
Expectations that memory price declines are bottoming out are not without merit.
TrendForce's DRAMeXchange research division, which tracks movements observed in the DRAM market, said last month that "DRAM spot prices have begun to rebound," and touted a rally in contract prices as early as the first quarter.
But in its most recent quarterly update Micron continued to suggest that the glut in supply would continue. It forecast DRAM supply growth to come in slightly above the industry, while NAND supply growth was expected "meaningfully below" industry supply growth.
The company was not the only chipmaker that received the thumbs up from Cowen.
With its quarterly earnings due Jan. 23, Western Digital (NASDAQ:WDC) has the opportunity to deliver better-than-expected earnings and raise guidance, citing improved NAND pricing, enterprise solid state drive market gains and improving hard drive margins, Cowen said, as it upgraded shares of Western Digital to outperform from market perform.