Nothing has been going well for Micron (MU) recently. MU stock has dropped from $65 at the end of May to $47 today as weakness in NAND pricing has been a concern and the fundamentals in DRAM on the pricing front have decelerated as well.
Fiscal fourth-quarter numbers and a fiscal 2019 guide, due this afternoon, will shed more light on the supply-demand situation for the chip giant. The fourth-quarter earnings will either reaffirm the bull thesis and cause MU stock to pop, or reaffirm the bear thesis and cause MU stock to drop further.
Heading into the print, Cowen analyst Karl Ackerman reiterated an Outperform rating on MU, while cutting the price target to $62 (from $72), which still implies an upside of 32% from current levels. (To watch Ackerman’s track record, click here)
Ackerman commented, “Clearly, investor sentiment is horrific going into the company’s print, and we now think MU should guide below for the first time in 8 quarters (FQ1:17). Estimates have come down the last 2 weeks, but we think NovQ expectations are still a touch too high. We are lowering our rev/EPS estimates for MU’s NovQ from $8.12B/$3.05 to $8.10B/$2.97, or below Street’s $8.44B/$3.06.
“Our field work in Asia last week indicates to us that DRAM ASPs appear challenged for the company’s NovQ and FebQ. We think prices should remain pressured on initial volumes of Chinese DRAM capacity in CQ4 and multiple data points indicating that hyperscale spending on server DRAM should fade in CQ4. Moreover, we think MU is gaining share of mobile NAND from WDC, but data points indicate weaker demand for Chinese Android smartphones where MU is more exposed. Indeed, the demand outlook for DRAM is less optimistic than 90 days ago. Further, our field work indicates that DRAM suppliers have already repositioned DRAM bits toward server and mobile DRAM. As a result, we are hearing of increased competition and lower-priced server DRAM contracts for CQ4,” the analyst continued.
Net net, most analysts are right there backing the chip giant, with TipRanks analytics revealing MU as a Strong Buy. Out of 22 analysts polled in the last 3 months, 17 are bullish on Micron stock while 5 remains sidelined. With a return potential of nearly 61%, the stock’s consensus target price stands at $75.73. (See MU’s price targets and analyst ratings on TipRanks)