Analysts from Deutsche Bank are chiming in with confident forecasts on Amazon.com, Inc. (NASDAQ:AMZN) and Micron Technology, Inc. (NASDAQ:MU) on back of Amazon’s Souq.com acquisition and a recent investor debate on Micron’s position in the memory sector. How will Amazon’s M&A leap into substantial Middle East markets help solidify its standing on the leaderboard? In a sizzling debate of bulls vs. bears, where does Micron fall into the mix? Let’s take a closer look:
Amazon Unlocks the Doors to the Middle East with Souq.com
Amazon made rumbles on the Street last Tuesday when the online auction and e-commerce leader bought the Middle East platform Souq.com in a deal circling $700 million.
This is a strategic move forward for Amazon that “makes sense,” as not only does Souq.com rank “among the larger acquisitions in Amazon’s history,” but Deutsche Bank analyst Lloyd Walmsley sizes up the buzz-worthy deal as a “key” to unlocking the doors to markets in the Middle East.
On back of the new acquisition that will bring along with it “Middle East markets with strong logistics and courier networks,” the analyst reiterates a Buy rating on shares of AMZN with a $1,050 price target, which represents an 18% increase from where the stock is currently trading.
Walmsley notes, “Souq started in 2005 as an auction platform and has transitioned into more of an Amazon-like platform with a mix of 1P/3P business through M&A (sukar.com in fashion), building out logistics (Q Express) and payments (Payfort) […] Souq provides Amazon a big leg up in the region with a large brand, customer base and logistics. Amazon can add improved selection, infrastructure and support, and bolster its competitive position.”
Additionally, the analyst points to rising rivalry forthcoming from Noon, another ecommerce platform about to hit in the Middle East, as a catalyst for the deal, surmising, “Noon is a soon-to-be-launched ecommerce platform with strong backers promising a large selection, same-day delivery, in-house repairs and payments. Noon will start in Saudi Arabia and the UAE and plans to enter Egypt and Kuwait in 2018. We suspect the ascendence of Noon.com was part of why Souq went from hiring bankers to raise money to an outright sale.”
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Lloyd Walmsley is ranked #423 out of 4,562 analysts. Walmsley has a 61% success rate and realizes 12.8% in his annual returns. When recommending AMZN, Walmsley yields 10.8% in average profits on the stock.
TipRanks analytics exhibit AMZN as a Strong Buy. Out of 30 analysts polled by TipRanks in the last 3 months, 29 are bullish on Amazon stock while 1 remains sidelined. With a return potential of nearly 8%, the stock’s consensus target price stands at $956.30.
Micron: Diversified Demand vs. Accelerating DRAM Capex
After hosting an investor bull-bear debate on Micron and the memory sector, Deutsche Bank analyst Sidney Ho is out with an overall bullish take on the chip giant who has benefited from “record profits.” As such, the analyst reiterates a Buy rating on MU with a price target of $35, which represents a 21% increase from where the shares last closed.
One takeaway for Ho from the debate highlights Micron and the memory sector as a highly “controversial segment,” considering the nearly even split between 40% of bullish investors against the 40% who are bearish, with 20% though encouraged short-term on the prospects, pessimistic mid- to long-term.
However, “Most investors were surprised/impressed by the magnitude of the F3Q (May) guidance and agreed that MU has done a much better job operationally than in previous cycles,” adds the analyst.
Those who are bullish on the industry praise “diversified” DRAM demand, as the analyst elaborates, “The bull case rests on the belief that the memory industry has become more rational and that Samsung is adding capacity just to offset wafer loss from tech migration.”
Conversely, the bearish take follows on the heels of Asia field tours, where investors point to accelerating commodity price fears, concerns that PC and smartphone demand will wane, and general confusion as to Samsung’s reluctance to keep raising wafer stars considering “the strong profitability of DRAM,” continues Ho.
Ultimately, “While MU has benefited nicely from rising DRAM ASPs, we are most impressed with the company’s execution on its technology roadmap and the financial discipline it demonstrated in the recent cycle. We expect memory shortages to persist for the rest of this year driven by the industry’s underinvestment in the past two years. While we understand some investors’ concerns about rising DRAM capex, we believe memory suppliers are mostly acting rationally, and we will continue to closely monitor supply growth,” Ho concludes.
As usual, we like to include the analysts’ 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 Sidney Ho is ranked #139 out of 4,562 analysts. Ho has a 73% success rate and gains 24.1% in his yearly returns. When recommending MU, Ho earns 14.6% in average profits on the stock.
TipRanks analytics show MU as a Strong Buy. Based on 18 analysts polled by TipRanks in the last 3 months, 17 rate a Buy on Micron stock while 1 maintains a Hold. The 12-month average price target stands at $35.53, marking a nearly 23% upside from where the stock is currently trading.