Memory Chips: Goldman Sets Buy On MU; Hold On STEC, SNDK

This morning, Goldman Sachs transferred coverage of the memory sector to analyst Kate Kotlarsky, who assumed coverage of Micron (MU) with a Buy rating and SanDisk (SNDK) with a Neutral rating, and launched coverage of STEC (STEC) at Neutral.

• Micron: She has a $12 price target on the stock, and asserts that the Street is under-estimating the DRAM company’s margin leverage. She sees gross margin expansion, driven by “benign” ASPs, tight memory chip supply/demand and significant DRAM cost reductions that she says are not fully reflected in Street estimates.
• SanDisk: Her price target is $40, which is substantially below the current price. “Valuation is full,” she says, asserting that there are risks to gross margin in the second half from the company having to source non-captive NAND supply at high cost.
• STEC: Kotlarsky’s price target is $11, slightly below current levels. “We believe valuation is full and see risk to full year Street estimates driven by slow solid-state drive adoption� – 70% of STEC�s sales – and increased competition” starting in the second half of this year.

In today’s trading:

• MU is down 10 cents, or 1%, to $9.81.
• SNDK is down 42 cents, or 0.9%, to $48.97.
• STEC is down 10 cents, or 0.8%, to $12.39.