Similar to other companies in the industry, Micron’s (MU) stock surged in early 2018 to record highs, before plummeting by as much as 50% towards the end of the year. But while the company closed 2018 20% lower, stock seems to be rebounding early in 2019, as shares have climbed 20% since the beginning of the year. This isn’t necessarily coming as a surprise for most investors, as Micron participates in a highly cyclical industry — 2018 clearly proved to be the wrong side of the cycle, as Micron and other industry companies all saw values plummet.
But the big question remains: Is 2019 a turnaround year for the industry and Micron? While Barclays analyst Blayne Curtis is neutral on the industry, he rates Micron as Overweight and with a $40 price target. (To watch the analyst’s track record, click here)
Curtis updates his Micron model to reflect January’s softer memory contract pricing, which was released last week. The analyst says that DDR4 prices continues to decrease, and anticipates DRAM pricing to decline 15% February and May. On NAND, Curtis says, “NAND contract was -3% M/M compared with our model at -15%/-10% for Feb/May and we leave [February] unchanged and move May to -12% Q/Q.”
On the declines, Curtis says, “these declines in contract pricing should not come as much of a surprise as expectations had looked for a double-digit correction in Q1. Demand data points continue to be negative (particularly in server/graphics) and memory suppliers are pointing to lower bit production for both DRAM/NAND but that likely will come down further as the year progresses.”
Lower prices do not bode well for the stock, which Curtis is bullish on. But the analyst concedes,”we fully understand that the stock likely treads water for some time, as pricing declines likely result in several earnings revisions over the next couple of quarters. However, we believe there is a hard floor in the stock at 1x BV (~$30 and climbing), and despite substantial earnings revisions the company is still earning $4-5, which is a huge improvement from prior cycles.” He closes saying that “eventually, the stock will work when investors realize the earnings trend is sustainable, and we believe we are closer to the turnaround than not and remain [overweight].”
Wall Street is moderately bullish on Micron. TipRanks analysis of 26 analyst ratings shows a Moderate Buy rating, as 17 analysts rate Buy, 8 rate Hold and 1 rates Sell. There is an average price target of $49.05, representing a 24% rise from current levels. (To see MU’s price target on TipRanks, click here)