Shares of memory chip giant Micron Technology, Inc. (NASDAQ:MU) are sliding nearly 2% today following a downgrade from brokerage firm Needham. Lead analyst Rajvindra Gill downgraded the stock from Hold to Underperform, as the company is scheduled to report its fiscal second-quarter earnings results tomorrow (3/30) after the market close.
Gill noted, “as we continue to see a weak PC market adversely affecting PC DRAM pricing, and checks pointing to emerging vulnerabilities in mobile DRAM. Given Micron has already shifted capacity away from PC towards mobile, and remains behind Samsung in its 20nm ramp, we fail to see vectors that will allow pricing to stabilize. We believe a similar dynamic could be developing in NAND as Micron continues to play catch-up on 3D NAND, with XPoint not expected to impact the model for at least 1-2 years. Net, we believe the Street’s revenue estimates calling for 12% Y/Y sales growth in FY17 after a 19% Y/Y decline in FY16 remain overly optimistic along with Street’s price targets of $10+. Moreover, with our revised ASP and unit projections, we forecast Micron will incur a negative $1.2Bn and $0.6Bn of FCF in FY16 and FY17 even after factoring the Inotera acquisition.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rajvindra Gill has a total average return of 14.4% and a 55% success rate. Gill has a -27.4% average return when recommending MU, and is ranked #57 out of 3749 analysts.