The Ratings Game: Micron stock heads for best day in a year after it’s dubbed a ‘top pick’ at Evercore—’it is game on for memory’

The PHLX Semiconductor Index
SOX,
+0.08%
is up 22.9% since the start of June, while Micron shares have lost 3.9% in that time and Lam shares have fallen 1.6%.

“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.
NVDA,
+1.99%
and Advanced Micro Devices Inc.
AMD,
-0.31%
shares have benefitted recently amid Facebook-parent Meta Platforms Inc.’s
FB,
+3.56%
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 are up 6.6% in Friday morning trading and on track for their biggest single-day percentage gain since Nov. 16, 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 is up 1.4% Friday, even as shares of peer Applied Material Inc.
AMAT,
-3.41%
are off 3.9% after the company issued a downbeat earnings report an afternoon earlier, citing challenges from supply constraints.