UBS analyst Timothy Arcuri upgraded Micron (MU) to Neutral as he sees producers taking a more anticipatory approach to DRAM supply. Meanwhile, the analyst also upgraded Lam Research (LRCX) to Buy, saying the upside in the stock is "too good to ignore" as a favorable trend may develop into 2019.

MUCH BETTER DOWNSIDE: In a research note to investors, UBS' Arcuri upgraded Micron to Neutral from Sell as he sees major producers taking a more anticipatory approach to DRAM supply. While the analyst maintains "fairly draconian" views on NAND pricing and thinks a recovery in the second half of the year seems unlikely, market dynamics have forced him to reconsider the downside case for Micron, especially considering his long-term bullish demand view. Arcuri previously argued for trough/normalized earnings per share of about $3-$6, but now he sees $7-$10 as more likely, and even this may prove conservative when also considering the company's margin stacking and cloud share gains. The analyst raised his price target on Micron shares to $60 from $42.

BUY LAM RESEARCH: Additionally, UBS' Arcuri upgraded Lam Research to Buy from Neutral, with an unchanged $220 price target on the shares. With the company's NAND shipments already down about 50% for the second half of 2018 and now having felt the "disproportionate brunt" of the Samsung (SSNLF) Pyeongtaek DRAM pushouts, the analyst thinks the shipment bar in September is set so low that a favorable trend could develop into 2019. While Arcuri has preferred KLA-Tencor (KLAC) since launch, he now sees upside in Lam Research that is "too good to ignore."

PRICE ACTION: In late morning trading, shares of Micron have gained almost 2% to $54.16, while Lam Research's stock has advanced over 2% to $174.81.