The firm also lowered its price target on Micron to $49 a share from its previous view of $60, representing only a small potential upside from the stock's previous closing price of $46.13.
While analyst Toshiya Hari still has a bullish long-term outlook for the industry, Hari isn't bullish on Micron's risk/reward ratio as other stocks rise in the sector. Goldman is bearish on second half demand in the sector.
Increased competition in the highly concentrated DRAM market could mean market share retraction for big players like Micron.
"In the longer term we see risk of China entering the DRAM market too, and DRAM can also be manufactured for trailing edge applications," Hari wrote.
As a result, Goldman also lowered its normalized EPS estimate on Micron to $4.85 from $6.70 for the year.
While the firm is bullish on the sector's long-term prospects it is also "cognizant of the view that potential weakness in smartphones could derail the pricing recovery that we forecast."
Goldman's checks suggest an implied valuation of just $14 a share for Micron, a 70% potential downside, but a tangible book value of $32 a share. The fact that the stock is trading toward the lower end of its historical range led the firm to its price target of $49 a share.
"We would await capex cuts by Micron and/or its competitors before considering becoming more constructive," Hari said.