Wednesday October 28, 11:58 AM
UPDATE 1-Goldman cuts SanDisk to neutral, ups Texas Instruments
Oct 28 (Reuters) - Goldman Sachs (NYSE: GS - news) raised Texas Instruments Inc (NYSE: TXN - news) to its highest rating on greater potential for margin expansion, while cutting flash memory maker SanDisk Corp (NASDAQ: SNDK - news) by a notch to 'neutral' on valuation.
Near-term downside risk for SanDisk stock should be limited as long as NAND supply-demand is in balance and pricing is stable, analyst James Covello wrote in a note.
NAND chips are used in a variety of consumer electronics applications such as cell phones and data cards.
'However, if NAND supply-demand dynamics begin to change, leading to excess capacity, we could become incrementally bearish given the potential risk to average selling prices and margins,' Covello said.
On Texas Instruments, Covello said the market undervalues the company's margin potential in 2010-2011.
'We see room for margin expansion in 2010 to Texas target of 55 percent, which should be a positive catalyst for the stock,' he added.
Texas Instruments' business should also benefit from sizable share gains in analog segment beginning in the second half of 2010, given its significantly lower cost structure, he said.
SanDisk' shares closed at $22.69 on Nasdaq (NASDAQ: news) while shares of Texas Instruments closed at $23.80 on the New York Stock Exchange Tuesday.
(Reporting by Mansi Dutta in Bangalore; Editing by Anil D'Silva) Keywords: CHIPMAKERS/RESEARCH
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