This Bull Sees Upside Potential for Micron Technology, Inc. (MU); Here’s Why

Cowen's Karl Ackerman believes NAND fundamentals and demand in Asia look solid near-term, with cost dynamics favoring MU in 2018.


Micron Technology, Inc. (NASDAQ:MU) is primed for a first fiscal quarter outclass of 2018 when the chip giant is expected to deliver results come December 19th– at least from the bullish eyes of Cowen analyst Karl Ackerman.

In fact, Ackerman writes that while this quarterly beat may be anticipated, the Street has not fully factored in upside potential for the second fiscal quarter of 2018 for the chip giant.

Ahead of the print in a confident earnings preview, the analyst maintains an Outperform rating on MU stock with a $50 price target, which implies a just under 28% increase from current levels. (To watch Ackerman’s track record, click here)

Ackerman explains, “A beat for MU’s NovQ is expected, but the upside opportunity in FebQ isn’t fully priced into the stock,” noting it simply is “not fully baked in.” Moving forward, the analyst continues to bet his chips on this chip giant, asserting: “Longer term, we remain favorably disposed toward DRAM w/ our checks in Asia indicating just slightly lower capex plans from Samsung in C2018. While the NAND supply picture is somewhat opaque in 2H:18, we see no fundamental change for the next few qtrs.”

What makes Ackerman so enthused for a beat and a raise? Chats with buyside investors, the analyst highlights, who not only anticipates upside potential, but one that presents real “magnitude.” From the analyst’s perspective, it is all too clear that the Street’s forecast ranging between $0.10 and $0.25 falls “too low” for the fiscal first quarter and when taking under account robust average selling price (ASP) momentum, “at least a dime too low” for the second fiscal quarter.

Moreover, “While some sell side peers have expressed their angst over near term softness in NAND spot pricing, we note that ~75% of industry NAND sales are done via contract and we take comfort in the trajectory of near term NAND pricing momentum as spot prices for mobile (eMMC) are 15% above CQ4 contract pricing, spot MLC is also 15% above contract and TLC spot/contract is in line,” the analyst continues.

Additionally, the analyst responds to investor attention keyed into the memory cycle, underscoring that after a great deal of field work in Asia last week, Ackerman’s takeaway is a positive one: “short term NAND fundamentals remain healthy and demand continues to outstrip supply.”

Ultimately, the analyst concludes that looking into next year, NAND cost dynamics should play out favorably for this chip giant boasting enticing upside opportunity.

TipRanks data pooled from Street-wide voices deem the consensus verdict a strongly bullish one when it comes to Micron as a compelling investment opportunity. Out of 25 analysts from the last 3 months, 22 rate a Buy on Micron stock while just 3 remain on the sidelines. With a return potential of 33%, the stock’s consensus target price stands at $53.24.