Micron (MU): What Does Hynix 1Q Print Spell Out for Chip Trends? Top Analyst Shares Two Cents

Mizuho's Vijay Rakesh chimes in on what he anticipates for the 2018 DRAM and NAND flash memory backdrop facing MU after the company's chip competitor Hynix's Q1 earnings release.


South Korean chipmaker SK Hynix released its first quarter print yesterday after the bell, exhibiting revenue that shot up 64% in year-over-year growth to 3.1 trillion won, or $2.9 billion. Here’s why this matters for rival semiconductor giant Micron Technology, Inc. (NASDAQ:MU):

Top analyst Vijay Rakesh at Mizuho takes Hynix’s 2018 DRAM guide in “upbeat” stride, paying attention to company commentary suggesting DRAM supply may continue to be “tight” for the rest of the year. Though flash memory tightness in the second quarter may “ease,” NAND could prove to be “significantly tighter” in the back half of the year with NAND channel inventory taking a 50% dip in the back half of the year from the first half.

In the bigger picture, trends are looking robust and “positive” for Micron, and on back of encouraging Hynix takeaways, the analyst maintains a Buy rating on MU stock with a $70 price target. Notably, these expectations imply a close to 42% upside from current levels.

In reducing interest expense by $36 million per year, or roughly $0.03 to $0.4 EPS, Micron has squared away an additional $680 million of 5.25% debt, cheers Rakesh- which takes the chip giant “one step closer to net positive cash on the balance sheet – a multi year as MU CF strong.”

Hynix’s first quarter DRAM bit growth slipped 5% quarter-over-quarter with average selling prices (ASPs) on a 5% rise. Meanwhile, NAND bit growth for the company fell 10% quarter-over-quarter with ASPs likewise dipping 1% quarter-over-quarter due to seasonality. “Hynix sees DRAM supply demand tight through the rest of the year, with its bit growth in the ~20% range, and industry DRAM channel inventory staying at the current 1-week level exiting 2018. Hynix noted it sees DRAM supply demand tight through 2018E quite contrary to current market concerns on DRAM oversupply. We believe DRAM bit growth with the transition to 1x/1y/1z has been much more muted combined with much higher Capital intensity as DRAM cycle times have doubled – all the more reason for DRAM OEMs to be disciplined,” continues the analyst.

Bottom line: “We are buyers on MU,” asserts Rakesh ahead of the company’s analyst day.

Vijay Rakesh has a strong TipRanks score with a 70% success rate and an impressive ranking of #22 out of 4,776 analysts on Wall Street. Rakesh earns 28.9% in his annual returns. When recommending MU, Rakesh garners 56.7% in average profits on the stock.

TipRanks indicates MU has won a strong bullish backing on the Street. Out of 22 analysts polled in the last 3 months, 18 rate a Buy on MU stock, 3 maintain a Hold, while 1 issues a Sell on the stock. With a return potential of 50%, the stock’s consensus target price stands at $73.67.

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