Micron, Qimonda: Credit Suisse Upgrades DRAM Sector

Credit Suisse’s Michael Masdea upgraded DRAM maker Micron Technology (MU) to Outperform from Neutral yesterday, asserting that “the risk/reward is compelling.” He asserts that the seasonally weak first half “is trending better than we feared,” and adds that DRAM results should trend up from first quarter lows. Masdea notes that he had downgraded the DRAM sector in September over concerns about a DRAM over-supply.

However, Masdea did lower his estimates for the company, going to $1.41 billion in sales and 1 cent a share for the fiscal second quarter ending in February from $1.57 billion and 12 cents, “driven by our inventory and pricing concerns.” For calendar 2007, he goes to $6.44 billion and 69 cents a share from $6.94 billion and 88 cents.

“While risks remain, including incremental DRAM supply and weak NAND Flash pricing,” he writes, “we believe planned mid-year cost reductions combined with the potential for profit improvement from Micron’s NAND Flash ramp (on better cost absorption) point to improving fundamentals. Thus, with numbers reset to account for the near-term risk, we are upgrading the stock.”

Masdea also raised his rating on the German DRAM producer Qimonda (QI) to Outperform from Neutral.

Micron shares were up 32 cents yesterday at $13.25; Qimonda was up 14 cents at $16.19.

MU/QI 1-yr comparison chart