Analysts weigh in on Micron Technology, Inc. (NASDAQ:MU) and Adobe Systems Incorporated (NASDAQ:ADBE), as the technology companies are both facing changes amid the volatile DRAM market. Adobe’s management had provided new goals for the future while Micron investors have their eyes on a Sandisk acquisition.
Micron Technology, Inc.
Micron Technology has been in the news related to its possible acquisition of competitor SanDisk Corporation. Last night, Bloomberg reported that SanDisk is hiring a bank for exploring a possible sale. SanDisk has two potential buyers; Micron and Western Digital. In relation to this news, analyst Sundeep Bajikar from Jefferies weighed in.
Yesterday, Bajikar maintained a Buy rating for the stock while maintaining a $30 price target. According to The Fly, Bajikar said, “A Micron-SanDisk combination would create a stronger U.S. memory-maker capable of competing more effectively with Samsung and SK Hynix.”
Talking about EPS estimates for the combined entity, Bajikar assumes a a 30% buyout premium to yesterday’s closing price of SanDisk. The analyst believes the combined company would generate 2016 EPS of $2.92; 10% higher than Micron’s independent EPS of $2.66.
Earlier in the month, on October 2nd, Bajikar had cut his price target for the stock to $30 from $33, after the company’s Q4 results, while maintaining the Buy rating. At the time, the analyst remained bullish on the company because of a “combination of favorable DRAM/NAND supply dynamics, Micron’s technology progress, and emergence of new categories of demand with Smartwatch and Car, would allow Micron to grow its revenues and earnings faster than its peer group of tech companies over the next 12-to-18 months.” He added, “Expectations are low, and we recommend buying the stock.”
Sundeep Bajikar has a 60% overall success rate recommending stocks with a +17.2% average return per rating when measured over a one-year horizon and no benchmark.
In total, including Bajikar, 23 analysts on TipRanks have recently rated Micron’s stock. Of these, 19 are bullish on the stock, while 4 prefer to remain on the sidelines. None of the analysts have recommended to Sell Micron’s stock. The average consensus price target for the stock is $22.83, an upside of around 21% over current levels.
Adobe Systems Incorporated
Last week, Adobe Systems hosted an Analyst Day in which the company outlined its goals for the next three years. Analyst Christopher Hickey from Atlantic Equities weighed in.
Yesterday, Hickey upgraded Adobe to Overweight from Neutral and increased his price target to $97, up from 80. According to The Fly, Hickey said, “Adobe outlined FY15-F18 targets last week at its analyst day for high teens revenue growth and margin expansion once the cloud migration ends.”
The company’s new targets for FY15-18 are 20 percent CAGR for revenue, 30 percent for EPS, and mid-20s for cash flow. Hickey has termed this target as the first “clean” growth rate. He also said this target was “meaningfully higher than the previous Atlantic Equities estimate of low double-digit top- and bottom-line growth.”
As per Hickey, Adobe’s guidance looks realistic due to factors like “strong products, increasing investment in salesforce and significant pricing power within its base of full creative cloud customers.” The analyst is optimistic due to “new disclosures” that “indicate Adobe has done a better job of attracting new users to Creative Cloud, while the installed base of Creative Suite hold-outs represent a larger opportunity than expected.”
Hickey concluded, “This gives us more comfort that the company’s Digital Media targets are achievable. Furthermore, in the event that subscriber acquisition slows, the CC (Creative Cloud) base is now close to the size where the company could use pricing to help achieve its financial targets.”
Christopher Hickey has a 50% overall success rate recommending stocks with a +7.0% average return per rating when measured over a one-year horizon and no benchmark.
As per TipRanks, out of 11 analysts who have recently rated Adobe’s stock, 8 have rated it as a Buy, 3 have rated it as a Hold, and none of the analysts have given a Sell rating to the stock. The average consensus price target for the stock is $91.80, an upside of 9.55% from current levels.