Analysts Chime In on Two Semiconductor Stocks: Micron Technology, Inc. (MU) and Ambarella Inc (AMBA)


Micron Technology, Inc.

Deutsche Bank analyst Sidney Ho reiterated a Buy rating on shares of memory chip maker Micron Technology, Inc. (NASDAQ:MU), with a price target of $16. However, the analyst lowered his estimates to reflect continued challenges in the PC market, along with newly-issued debt and earnings dilution from Inotera.

Ho wrote, “Persistent weakness in PC remains an issue near term for MU given DBe ~40% of its DRAM bits are shipped to the PC market. Smartphone data points have also been mixed. As such, we lower our DRAM ASP estimate for CY16 partially offset by improved mix. We also increase our interest expense estimate to reflect $2b of new debt at interest rate of ~7.5%. Lastly, we trim our estimate for equity investment income from Inotera, which reported a net loss in 1Q16 and it looks to be 10-15% dilutive to MU’s CY17E EPS on a pro-forma basis (deal expected to close in July). Net, we lower our EPS estimate for F3Q (May) from ($0.09) to ($0.14) and F4Q (Aug) from $0.04 to ($0.01). For the year, we cut our EPS estimate for CY16E from $0.16 to ($0.03) and CY17E from $1.60 to $1.30.”

“That said, industry DRAM capex appears to be more disciplined, which should moderate supply growth in 2H16. In addition, MU appears to be executing on track with its technology roadmaps and product mix optimization, which should further drive margin improvements in the next 6-12 months. Despite the recent run, MU’s risk-reward remains favorable,” the analyst concluded.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Sidney Ho has a yearly average return of -3% and a 52.6% success rate. Ho has a -22.4% average return when recommending MU, and is ranked #3240 out of 3972 analysts.

Out of the 25 analysts polled by TipRanks (in the past 3 months), 16 rate Micron stock a Buy, 5 rate the stock a Hold and 4 recommend a Sell. With a return potential of 12%, the stock’s consensus target price stands at $14.25.

Ambarella Inc

Canaccord analyst Matt Ramsay reiterated a Buy rating on shares of video encoding chip maker Ambarella Inc (NASDAQ:AMBA), with a price target of $65, as the next key milestone for the company will be its fiscal first-quarter 2017 results this Thursday, June 2nd, after market close.

Ramsay wrote, “Consistent with the soft guidance management provided back in March, we anticipate revenue will decline roughly 15% Y/Y with less visibility into professional security camera sales in China and essentially zero chip sales to previously top customer GoPro given sports camera inventory in the channel and the delay of GoPro’s Karma drone. That said, our long-term conviction regarding Ambarella’s leading technology position in several growing end markets including wearable, security, automotive, and drone cameras remains intact and we believe long-term investors will be rewarded as new design wins ramp and the launch of new 14nm chipsets next year return the company to solid Y/Y sales/earnings growth.”

Bottom line: “Given $9/share in net cash and solid growth prospects for the overall business outside of GoPro, we believe shares represent an attractive value for long-term investors.”

According to TipRanks.com, analyst Matt Ramsay has a yearly average return of -3.1% and a 49% success rate. Ramsay has a -33.5% average return when recommending AMBA, and is ranked #3429 out of 3972 analysts.

Out of the 13 analysts polled by TipRanks (in the past 3 months), 7 rate Ambarella stock a Buy, while 6 rate the stock a Hold. With a return potential of 41%, the stock’s consensus target price stands at $57.78.