Personally, I think Memphis is a real contender. To be honest, I'm not sure why people think they're NOT. A favorite? By no means. But they are a real contender.
One thing I really like about Memphis is that they haven't given in to the idiotic "small ball" meme that's such a fad these days. I really don't know why people think "small ball" is some formula to automatically winning a basketball game. It is pretty well established that playing small ups the offense at the expense of defense (see: New York Knicks, Miami Heat this year), and only really works if you have a versatile star like Lebron.
Memphis is big, and they are making all these small teams suffer on the other end of the court. Marc Gasol is playing like a superstar, Zach Randolph is having a career revival, Rudy Gay is good, TA and Conley have always been extremely underrated, and their bench has given them consistent 3-point shooting and energy.
The only mark against them, really, is that Gasol and Randolph's play might not be sustainable. That is, it is possible they are just on hot streaks that will come to an end. On the other hand, how often does a hot streak line up with such a hard schedule as the Grizzlies have had so far?
I think they are really going to surprise people in the playoffs. Barring injury or major regression by one of their core players, I see them making the WCF (and losing to the Thunder in a close series). Honestly, I think they can beat the Heat in a Finals series if they manage to get there ... they have a punishing inside game, which the Heat have never been able to cope with, defensively.