Buy Micron (MU) Stock on Weakness, Advises Analyst Hans Mosesmann


Micron (MU) shares are plunging nearly 4% today after the chip giant guided gross margins to decline Q/Q due to the Chinese tariffs and some inventory adjustments at a specific customer. Furthermore, November quarter sales were guided to $7.9 billion to $8.3 billion, below Street’s estimates of $8.45 billion. The revenue guidance was partially affected by shortages of Intel CPUs adversely impacting consumer demand in client computing.

“We are buyers today on potential weakness in MU shares,” says Rosenblatt analyst Hans Mosesmann, who reiterates a Buy rating on the stock, while cutting the price target to $110 (from $120). His revised price target implies a potential upside of 147% from where the stock is currently trading. (To watch Mosesmann’s track record, click here)

Mosesmann commented, “A few puts and takes but if we have entered a down-cycle, we are clearly buyers of MU today. Near-term headwinds: 1) CPU shortages, 2) DRAM inventories at a few customers, 3) some NAND price pressure, and 4) 10% tariff impact due to the $200 billion in China imports. Near to mid-term tail winds 1) end demand for memory is solid if not strong, 2) supply for NAND bits is decelerating to 35-40% in 2019 from 45% in 2018, 3) NAND is seeing demand price elasticity, 4) industry supply agility to respond to nearterm demand trends, and 5) Micron’s aggressive share buy-back posture entering FY19.”

“The bear case based structural collapse in pricing and/or multi-year over-supply impacting the Micron business model is, in our view, untenable given supply dynamics for 2019 (fewer bits per node transitions and CapEx discipline), and healthy memory content growth,” the analyst concluded.

Most of the Street remains unfazed by cries of memory shortage, supporting Mosesmann’s vote of confidence, as TipRanks analytics exhibit MU as a Strong Buy. Out of 22 analysts polled in the last 3 months, 17 are bullish on Micron stock while 5 remain sidelined. With a return potential of nearly 58%, the stock’s consensus target price stands at $69.55. (See MU’s price targets and analyst ratings on TipRanks)

 

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