Micron Technology, Inc. (NASDAQ:MU) recently disclosed that it believes overall demand environment to be healthy with a slowdown in supply growth over the next few quarters and noted that they expect positive momentum to continue into 2Q17. However, Needham analyst Rajvindra Gill remains cautious, reiterating an Underperform rating on the stock.
Gill wrote, “We’ve underestimated positive stock price action due to the improving DRAM environment, but we maintain our Underperform given: 1) unfavorable risk/reward with peak multiples; 2) major levels of gross/net debt ($10B and $5B — you have to go back before 2007 to even approach this debt level); and 3) currently, not cost competitive in 3D NAND. Compared to Samsung, MU is at least 2 yrs behind, and as a result of its high cost it is limited from playing in the fast-growing markets. Bullish investors seem to be presuming that the cost situation will change (30% cost benefit as MU transitions to 1st gen), but we wonder how Samsung will react; we also note spotty track record in DRAM process node transition. We are concerned that as Samsung transitions to 18nm, MU will once again be at a cost disadvantage.”
Gill is one of the top analysts on Wall Street covering technology. His picks average a 14 percent one-year return, and he’s ranked in the top 10 percent of all analysts, according to TipRanks.com.
Out of the 18 analysts polled by TipRanks (in the past 3 months), 14 rate Micron stock a Buy, 2 rate the stock a Hold and 2 recommend a Sell. With a potential upside of 6%, the stock’s consensus target price stands at $20.79.