Mizuho Upgrades Micron and Western Digital on Stronger Memory Demand Forecasts

Micron Technology (MU) and Western Digital (WDC) saw positive price action Tuesday following a bullish upgrade from Mizuho. The investment bank shifted its rating for both memory makers to 'Buy,' signaling confidence in a recovery across several key hardware segments. The upgrade is driven by a significant revision in demand forecasts for the first quarter of 2022. Mizuho analysts previously anticipated a sharp decline in PC unit sales of 10% to 15%, but now expect the drop to be limited to 5% or potentially remain flat compared to the fourth quarter of 2021, with total sales potentially rising 5% by the end of 2022. In addition to PCs, the bank highlighted a positive outlook for the server and handset markets. Mizuho expects server orders from major cloud providers, including Amazon and Alphabet, to return early in the first quarter. Similarly, handset sales are now projected to remain steady rather than facing the previously feared 10% sequential decline. From a valuation perspective, Mizuho noted that Micron is trading at approximately 16 times trailing earnings, with a price target of $95 up from its current level of just over $85. Western Digital, trading under $60, was given a target of $75, with a valuation of less than 12 times earnings. The bank suggests both companies are well-positioned to outperform even with modest improvements in the memory market.