Deutsche Bank analysts weighed in today on the memory chip giant Micron Technology, Inc. (NASDAQ:MU) and mobile payments company Square Inc (NYSE:SQ), with brief commentaries and views.
Micron Technology, Inc.
Deutsche Bank’s Sidney Ho reiterated a Buy rating on shares of Micron, with a price target of $20, following the news that Micron has agreed to buy all the shares it doesn’t already own in Inotera Memories, in a deal valued at $3.2 billion.
Ho wrote, “While the transaction will increase MU’s scale and cash flow generation, we are a bit puzzled given the economic benefits that MU is currently enjoying as a minority investor. Specifically, 100% of Inotera’s DRAM output is sold to MU at cost-plus (which will switch to margin-sharing starting in 2016), and MU is not responsible for Inotera’s capex for its ~100k wspm capacity.”
The analyst continued, “We suspect that the potential for a buyout was brought up as part of the annual negotiation of the supply agreement. Perhaps given the strategic importance of Inotera, who currently supplies 35% of MU’s DRAM production, MU believes it needs to have better control of Inotera’s technology migration and manufacturing process. We also think by owning 100% of Inotera, MU may benefit from additional flexibility for its manufacturing network, as MU seems unwilling to use Inotera’s capacity in the past to produce products other than DRAM.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Sidney Ho has a yearly average return of -7.7% and a 45.5% success rate. Ho has a -22.0% average return when recommending MU, and is ranked #3340 out of 3618 analysts.
Out of the 20 analysts polled by TipRanks in the last 3 months, 14 rate Micron Technology stock a Buy, 4 rate the stock a Hold and 2 recommend a Sell. With a return potential of 50.29%, the stock’s consensus target price stands at $20.50.
Additionally, Deutsche Bank’s Bryan Keane initiated coverage on shares of Square, with a Hold rating and price target of $13, which represents a potential upside of 7% from where the stock is currently trading.
Keane wrote, “With a very visible brand name, growing customer base and expansive solution set, Square has disrupted the small merchant acquiring landscape with first to market innovative products, transparent and simplified pricing, and end-to-end commerce platform. Square is expected to deliver 50%+ organic revenue growth in FY15 and has guided to 20-25% LT revenue growth, significantly higher than the traditional merchant acquirers driven by secular tailwinds, share gains, moving up-market into mid-tier retailers, valueadded POS services, and expanding into financial and marketing services.”
“Risks include slowdown in consumer spending, scaling to positive EBITDA growth, small merchant churn, regulation, and increased competition,” the analyst added.
According to TipRanks.com, Keane has a yearly average return of 13.5% and a 73% success rate. Keane is ranked #143 out of 3618 analysts.
Out of the 2 analysts polled by TipRanks, 1 rates Square stock a Buy, while 1 rates the stock a Hold. With a return potential of 11%, the stock’s consensus target price stands at $13.50.