Micron (MU) Stock’s Biggest Bull Just Cut the Price Target; Here’s Why


Micron’s (MU) biggest bull on Wall Street, Rosenblatt’s Hans Mosesmann, has slashed his price target for MU stock by more than 20%, from $110 to $86, citing continued price pressure on NAND with Micron yet to see any significant inflection on demand due to price elasticity. That said, Mosesmann keeps his rating at Buy. (To watch Mosesmann’s track record, click here)

The situation at Micron always boils down to simple supply-demand fundamentals in the company’s core DRAM and NAND markets. When those supply-demand fundamentals are favorable and project to remain favorable, Micron stock does well and the opposite.

“We came away from our weekend of meetings in China with datapoints that indicate continued NAND Flash price pressure, and rather stable DRAM prices amidst mixed demand trends,” Mosesmann stated. “The complicating factor in many of our meetings (memory and non-memory), is the trade/tariff situation between China and the U.S. that has muddled visibility. NAND bit supply is seen as ~40% in 2019 and beyond (below the mid-40s or so in the past couple of years). As of yet, DRAM contract prices for 1Q19 have not been settled (they are above spot levels in 4Q18), and we see an interesting negotiating dynamic occurring given that, at least in DRAMs, there is no collapse in pricing seen anytime soon given DRAM bit supply still seen as growing ~20% in 2019 and beyond (from the low-20s in the last couple of years).”

“We maintain our November quarter sales and non-GAAP EPS estimates of $8.1 billion and $2.95 respectively. For the February quarter our sales and non-GAAP EPS estimates move down to $7.45 billion and 2.61, from $7.9 billion and $2.87 respectively driven mainly by NAND Flash ASP declines,” the analyst concluded.

Most of the Street remains unfazed by cries of memory shortage, as TipRanks analytics exhibit MU as a Buy. Out of 24 analysts polled in the last 3 months, 17 are bullish on Micron stock while 7 remain sidelined. With a return potential of 61%, the stock’s consensus target price stands at $65.04. (See MU’s price targets and analyst ratings on TipRanks)

 

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