Cowen Bullish All the Way on Micron Technology, Inc. (MU), Calls Out the Street for Low Estimates


Micron Technology, Inc. (NASDAQ:MU) shares were rising almost 5% yesterday after Goldman Sachs decided to get bullish on the chip giant. Cowen analyst Timothy Arcuri likewise chimes in from a spectrum of confidence and is skeptical as to why more are not riding the bullish train.

Predicting a stellar showing ahead from the giant, even taking under account NAND ASP apprehensions (which should not start dipping until the end of 2017), the analyst reiterates an Outperform rating on shares of MU with a $33 price target, which represents a 33% increase from where the stock is currently trading.

February particularly proved strong for Micron, whose commodity DRAM raced 36% quarter-over-quarter, server DRAM escalated a “whopping” 40% quarter-over-quarter, mobile DRAM rose 7% quarter-over-quarter, commodity NAND surged 13% quarter-over-quarter, cards jumped 18% quarter-over-quarter, mobile NAND (eMMC) stepped up 18% quarter-over-quarter, and SSDs increased 12% quarter-over quarter.

In reaction, the analyst projects the giant’s blended NAND ASP has a potential 13% rise waiting for the fiscal second quarter, compared to his prior expectations calling for a 5% surge, as well as predicts blended DRAM ASP could advance 19% quarter-over-quarter, a boost from his prior estimate looking for 7%. Though Arcuri acknowledges ASP growth rates will most likely not stay this high, he notes a sequential DRAM ASPs pull-back should not come into play until the close of the year, especially “[…] as spot pricing continues to hold up well, smartphone content should expand in 2H on new product launches.” For example, Apple Inc. (NASDAQ:AAPL) has a tenth anniversary iPhone model bringing about lots of buzz, and the analyst anticipates Apple will move to 3GB for the iPhone X.

Overall, “The point here is that despite recent punk stock performance, estimates are STILL materially too low. Ergo, despite our concerns around NAND ASP moving through ’17, this suggests MU could earn ~$3.50 GAAP THIS YEAR or a very similar number to what it earned in C2014 when the stock peaked at $35. This time, we would additionally argue that the mere specter of China entering the memory market is going to keep Samsung incredibly rational in an attempt to keep MU (or anybody else) from striking a industry NPV-destroying IP deal with China in NAND and MU had made huge strides in its 3D process roadmap in recent Qs. The point we are making here is that there is no reason why MU’s multiple should compress this much (or at all, really) relative to C2014 if these numbers are close to being right. We continue to like our $33 target in light of the above factors,” Arcuri concludes.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Timothy Arcuri is ranked #128 out of 4,512 analysts. Arcuri has a 66% success rate and realizes 17.2% in his annual returns. When recommending MU, Arcuri yields 40.6% in average profits on the stock.

TipRanks analytics demonstrate MU as a Strong Buy. Out of 22 analysts polled by TipRanks in the last 3 months, all 22 are bullish on Micron stock. With a return potential of nearly 16%, the stock’s consensus target price stands at $28.41.

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