Analyst Doubles Down on Low Estimates for Micron (MU) Stock

Susquehanna analyst Mehdi Hosseini is still Neutral on Micron Technology (MU) stock and says he feels comfortable with his below-consensus estimates for the February quarter. The analyst responds to new November guidance and metrics on DRAM supply/demand that was presented at a competitor’s conference Friday. The analyst’s target price is $45, showing an upside of 17%. (To watch Hosseini’s track record, click here)

MU reports November revenue might be at the low end of the company’s previous guidance, which ranged between $7.9 billion – $8.3 billion. The reason? Weak demand and excess channel inventories. At the same token, Micron expects EPS for the November quarter to exceed the midpoint of guidance, which was between $2.95 plus or minus $0.07 versus consensus of $2.95/2.92. The company also commented on imbalances in DRAM supply and demand dynamics but did not explain how Micron came up with the February guidance.

“In this context, we argue the brunt of the double-digit DRAM ASP decline will be felt in the February quarter, with minimal impact on the November quarter, which in our view was mostly impacted by weaker NAND ASP trends. All in all, we remain comfortable with our below-consensus February-quarter revenue/EPS estimates of $6.9bn/$1.91, which compare to the current consensus of $7.5bn/$2.53. Perhaps this brings us full circle to the CIP analysis we published yesterday arguing that MU will keep as much installed equipment turned off as a means to better manage margin profile,” Hosseini suggested.

“We are modeling a DRAM ASP decline of -8% and -15%, respectively, for the November and February quarters. As for NAND, we are modeling sequential bit shipment growth in the high single digits and low single digits for the November and February quarters, respectively, with blended ASPs down 20-25% in the November quarter and down 15% in the February quarter,” Hosseini explained.

The analyst is a bit more hesitant than the rest of the Street. TipRanks reviewed 24 analysts who have their eye on the chip market and 15 are bullish, 8 are sidelined and one is bearish. The consensus price target is $59.05, showing an upside of 53%. (See MU’s price targets and analyst ratings on TipRanks)

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