Morgan Stanley analysts said they expect the computer memory industry to reach new highs through the remainder of 2024, although investors are “generally” reluctant to buy such stocks at such high prices. Analysts at the bank said: “In the middle of the cycle, we see a number of new highs for the remainder of the year. After our latest inspection, we find no major issues in memory, but investors may need to correct to take advantage of this.” By Shawn Kim Led, wrote in a June 25 research note. “Buying new highs has a better win rate than trying to buy lows… Stock prices are the present value of future earnings, and we see better-than-expected industry growth and company fundamentals that should reward investors.” Analyst Adding that in addition to attractive valuations, demand for memory stocks is expected to increase due to wider use of AI-driven applications, infrastructure, tools and services. They forecast better-than-expected industry growth and argued that “company fundamentals should be rewarded by investors,” while also pointing to certain supply bottlenecks and continued strength in memory prices. The bank likes several stocks in the sector. Top picks and overweight stocks South Korean chipmaker SK Hynix is Morgan Stanley’s “top pick.” The analysts explained: “We view SK Hynix as the clear leader in the HBM (high bandwidth memory) category and believe it will maintain the best idiosyncratic growth/returns and capture the majority of the HBM market share in 2025. “. Also on the list is Samsung Electronics: despite the company’s poor performance in the first half, analysts noted. “We believe Samsung shares may experience a tactical catch-up rally, with NVDA’s (Nvidia) HBM3e 12 stack qualification emerging as a key catalyst for re-rating. HBM has delivered multiple years of substantial incremental tangible growth, which we think investors are recognizing To this point there is long-term potential for sales and earnings growth,” they wrote. Morgan Stanley gave these two stocks an overweight rating, with SK Hynix’s target price at 300,000 won ($216), an increase of about 26.6% from the closing price on June 26, and Samsung’s target price at 105,000 won. That is about 22.6%. Both stocks trade on the Korea Exchange and the iShares MSCI Korea ETF (SK Hynix has a weight of 10.7% and Samsung Electronics has a weight of 22.2%). The bank also likes Western Digital because its first-quarter results were “very strong” compared with peers. The analyst added: “Looking ahead, the company expects a surge in high-density SSDs (solid-state drives) in the AI market; we think this growth will improve significantly in 2H.” Morgan Stanley is overweight on the stock, And set the target price at $86, an increase of nearly 12%. —CNBC’s Michael Bloom contributed to this report.
