This Analyst Calls for a Beat-and-Raise from Micron Technology, Inc. (MU) Ahead of Tonight’s FQ1 Showcase

Rosenblatt's Hans Mosesmann bets on nearly 70% upside potential for Micron shares ahead of its first fiscal quarter earnings for 2018.

Micron Technology, Inc. (NASDAQ:MU) shares have gained 4% in the last 24 hours ahead of the chip giant’s first fiscal quarter print of 2018 due this evening. Though Micron was recently hit with a pullback on back of NAND flash memory fears of weakness, Wall Street’s consensus still goes to the bulls on this semiconductor company.

Rosenblatt analyst Hans Mosesmann sets positive expectations ahead of the print, calling for “a beat-and-raise” approaching the new year. There may be some seasonal mobile and PC market weakness, Mosesmann warns, but what comprises of around 45% of Micron’s sales is thankfully “offset somewhat by datacenter/server and specialty memory market strength (~55% of sales).”

Regarding DRAM supply and demand, the analyst anticipates a backdrop for the first half of next year to fall between “balanced” and “tight,” with NAND coming back to an increasingly “benign supply/demand dynamic where pricing declines mid-single digits per quarter due to price elasticity stimulating demand.”

“We note that the ASP strength in NAND over the past couple of quarters was unhealthy and unsustainable due to 3D NAND manufacturing challenges and inefficiencies associated with 2D to 3D NAND transitions. Resumption of normal NAND price declines on its own does not signal a memory cycle peak in our opinion as some observers suggest,” adds the analyst.

Ultimately, “We continue to view the current memory industry as the best in semiconductor history with its duration (longer) and nature (content-driven) being key drivers within a rational oligopolistic industry. Specific to Micron we are encouraged by management’s very aggressive FCF deployment to de-levering activities (exit FY2018 in a net cash positive position), as this should lead to investor base diversification,” Mosesmann surmises.

Therefore, ahead of the print, the analyst maintains a Buy rating on MU stock with a $75 price target, which implies a close to 70% upside from current levels. (To watch Mosesmann’s track record, click here)

TipRanks points to a strong bullish analyst consensus on Micron’s opportunity in the market, with 20 of 22 analysts polled in the last 3 months rating a Buy on the chip giant and just 2 maintaining a Hold on the stock. The 12-month average price target stands at $54.04, marking a solid upside of nearly 24% from where the stock is currently trading.


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