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Trends in the DRAM and NAND flash market are “neutral to positive” for Micron Technology (MU), according to a note today from Weston Twigg of Keybanc, who takes the temperature of pricing and supply for the parts.

Twigg, who has a Sector Weight rating on Micron stock, thinks the shares are about at ‘fair value, at 4.9 times what the earnings the company may make this year.

The neutral to good news is DRAM supply is tight and staying that way, while NAND is headed for “oversupply,” but that will burn itself off and return to tight conditions later this year, he thinks:

Overall DRAM supply should remain tight until new capacity comes online later this year, with very little new capacity anticipated in the 1H. Based on our checks, we expect q/q DRAM pricing to increase in the mid- to high-single-digit percentage range in the 1Q (the higher end of the range for PC/server DRAM, the lower end of the range for mobile DRAM). We expect DRAM pricing to flatten in the 2Q, and to be flat to down modestly in the 2H. DRAM producers are still typically anticipating around 20% bit demand growth this year, and appear to be planning supply in that range, with around half of the bit growth coming from node transitions, and half from new capacity. NAND pricing is widely expected to decline in the 1H, but only moderately in the 1Q. We continue to expect NAND oversupply in 1H18 as producers ramp 64-layer 3D NAND into high volume. Based on our checks, we expect NAND contract pricing to decline slowly in the 1Q, perhaps 3-5% q/q, but more sharply in the 2Q, perhaps into double-digit territory. For NAND, we believe the spot market will be a good predictor of contract declines this year (128Gb TLC NAND was down 2.6% this week), so we should have frequent indications of supply/demand variations. By 2H18, we expect pricing declines to moderate or even flatten as supply growth decelerates. Demand is very price elastic, and as pricing declines this year, we expect rapid adoption of SSDs, lending risk to rapid cannibalization of the HDD market.

For Micron’s competitor Western Digital (WDC), which he also rates Sector Weight, there is also an upside benefit from pricing stabilization in NAND, though the immediate price declines may pressure its margins.

For Seagate Technology (STX), another Sector Weight, Twigg sees potential cannibalization of hard drives as something that could become a “significant headwind” to Seagate, even though the company’s expected to get the benefit of its participation in the buyout of Toshiba’s (TOSBF) NAND factories.

Micron shares ended today down $1.08, or 2%, at $45.80, Western stock rose 52 cents, or 0.6%, to close at $82.69, and Seagate rose 30 cents, or 0.7%, to $42.94.