Micron Technology, Inc. (NASDAQ:MU) has been deeply impacted by the price fluctuation of DRAMs, or dynamic random-access memory chips. Since DRAMs are used in computers, semiconductor companies such as Micron have been affected by the decreasing popularity of PCs.
Aside from the fall of the PC, DRAM prices have been falling since 2011 due to increased competition and consolidation within the sector. Some analysts thought that DRAM prices would stabilize in 2013 when companies began to produce fewer DRAMs for PCs and more for mobile and tablets and servers, but recent data indicates that DRAM prices may continue to fall in the future due to excess supply.
Analysts have opposing views on how fluctuations in DRAM pricing will impact Micron.
According to Smarter Analyst, Piper Jaffray analyst Ruben Roy maintained an Overweight rating on the stock on June 9, though he slightly lowered his price target from $35 to $34. Although Roy is more cautious on DRAM pricing due to weakness from PCs, he still sees “MU shares as cheap.” After a meeting in Taiwan, Roy expects “PC DRAM prices to continue declining for the rest of 2015.” He continued, “While DRAM comprises just 1/3 of MU’s DRAM revenues, we believe ongoing price declines will present a meaningful headwind throughout 2015. The good news is mobile and server DRAM pricing remains stable with demand picking up, especially due to the upcoming iPhone cycle which will likely include higher DRAM densities.”
Ruben Roy has rated Micron 12 times since October 2013, earning a 17% success rate recommending the stock with an average loss of -7.0% per MU rating. Overall, Roy has a 57% success rate recommending stocks with a +11.1% average return per recommendation.
Drexel Hamilton analyst Richard Whittington was more concerned by the future of DRAM prices and he downgraded Micron from Hold to Sell with a $20 price target. Whittington noted, “Predicated upon a view Samsung’s strategic interests bring willingness to accept lower memory margins, DRAM price drops are liable to continue.” He continued, “PC DRAM price weakness has spread to mobile, reducing margins and earnings estimates as Samsung brings process cost drops to customers.”
Richard Whittington has rated Micron 14 times since September 2012, earning a 73% success rate recommending the stock with a +24.9% average return per MU rating. Overall, the analyst has a 79% success rate recommending stocks with a +21.5% average return per recommendation.