Another Analyst Reduces Micron (MU) Stock Price Forecast; Here’s Why


2018 is proving to be one to forget for Micron (MU). After the stock surged more than 40% between January and March, the company is expected to end the year deep in the red. While investors are happy about fiscal 2018 financial results (operating profit was near 50%), Wall Street seems to be bracing for a significant downturn in the chips market.

RBC Capital analyst Amit Daryanani expects a downturn in NAND and DRAM pricing to impact MU and, as a result, he lowers his price target on MU stock to $59 (from $65). However, Daryanani is still bullish on the chip giant with an Outperform rating. (To watch Daryanani’s track record, click here)

Daryanani is “adjusting (February quarter) estimates and beyond to reflect a challenging NAND & DRAM demand environment.” The analyst writes, “NAND pricing could compress by ~25% this year and declines will unlikely abate in 2019, resulting in 25-30% declines,” while DRAM “pricing is starting to soften… (and expects a) ~15% declines next year.”

From a demand perspective, the analyst expects “mobile DRAM (to be) impacted by (muted) iPhone and Chinese smartphone”, while “server demand could see (a) slowdown as inventories have risen and content growth slows next year (from 40% to ~25%).” Finally, Daryanani believes “graphics demand (will be) impacted by a decline in cryptocurrency mining” which has also plagued Micron’s rivals.

Daryanani comments that “from a supply perspective (with weakened DRAM prices), suppliers have started curtailing capex.” He cites Samsung adjusting “Line 18 wafer starts from initial 80K to 50-60K until late 2019” and expects Micron to not plan “any additional wafer starts but should grow bits at the ~15% level driven by 1X ramps.”

While Daryanani cut his price target, he still expects the stock to grow significantly over the next year. Wall Street is equally as bullish on Micron. TipRanks tracking of 25 analyst ratings on the company shows an average price target of $58.87, or nearly 64% higher than today’s level. Of the 25 analysts, 17 recommend Buy, 7 recommend Hold and one recommends Sell. (See Micron’s price targets and analyst ratings on TipRanks)

 

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