One analyst is bullish on Micron Technology, Inc. (NASDAQ:MU) as it embarks on a restructuring plan to downsize, while and another analyst is bearish on Boeing Co (NYSE:BA) as it begins to research a new type of aircraft. Read why Micron could takeoff and why Boeing could be coming in for a hard landing.
Micron Technology, Inc.
Amidst company downsizing, Argus Research analyst Jim Kelleher weighed in on Micron. The company has recently released distress signals in the form of layoffs and project consolidations. However, the analyst remains bullish on the technology company, particularly pertaining to risk-tolerant investors.
Despite showing signs for concern, Kelleher argues that Micron can add value to risk-tolerant investors’ portfolios. The analyst explains, “MU remains a deep-value idea in Argus technology coverage. We recommend MU for risk tolerant investors aware of the risks of investing in a beaten down stock.”
The company has seen a year-over-year decline in fiscal 3Q16 revenue of about 25%, according to the analyst. This descent in revenues follows reports of a 27% revenue decline in 1Q16 and another 30% revenue decline in 2Q16. The analyst explains that even though top-line revenues are below consensus, the 25% decline in revenue still marks the smallest decline in revenue for Micron since 1Q15.
On top of falling revenues, the company reported a delay in acquiring the remaining portion of Inotera, a company that Micron acquired a 35.5% stake in back in 2008. This delay does not bother the analyst, as he believes that the delay makes sense “Given the continuing weakness in DRAM market conditions.”
The analyst reiterates a Buy rating for MU with a price target of $22.00, emphasizing that he believes Micron could be a good fit for risk tolerant investors.
According to TipRanks, the consensus price target for MU is $15.56, with 78% of analysts issuing a Buy rating, 13% maintaining a Hold rating, and the remaining 9% upholding a Sell rating for the stock.
Jim Kelleher has a 56% success rate recommending stocks with a 6.1% annual average return per rating.
As Boeing begins to research “Middle of the Market” aircraft, Merrill Lynch analyst Ronald Epstein remains bearish on the company.
A Middle of the Market aircraft has 200-270 seats and a range of 2,900-5,000 nautical miles. Boeing has named its potential Middle Market project the 7M7. This market is yet to be penetrated by Boeing and the analyst believes that, after the production debacle of Boeing’s 787, which built up $30 billion in deferred production costs for the company, Boeing has to make a decision to either build or ditch this specialized market aircraft.
Epstein does believe that this middle market does exist, however. He also notes that Boeing’s ability to recover its lost capital will depend upon how efficiently it can execute the build of the 7M7. The analyst explains, “If launched, we expect the EIS of a proposed Boeing 7M7 aircraft to be in the mid 2020’s with a list price of ~$163mn and a realized price of ~81mn.” The development costs for the aircraft are expected to be about $15 billion. The analyst believes that Boeing’s continued cost of development for the aircraft into the 2020’s could pose a headwind for the company.
Following this announcement from Boeing, Epstein maintains an Underperform rating on the company with a price target of $125.00.
According to TipRanks, Boeing is currently a Moderate Buy with a consensus price target of $151.50. 58% of analysts maintain a Buy rating for BA, while 33% issue a Hold rating, and the remaining 9% uphold a Sell rating for the stock.