Is the Worst Behind Micron (MU) Stock?
Year-to-date, Micron (MU) stock is up roughly 25%. So clearly the bears lost major battles.
However, the bad news for investors is that chip prices are keep falling due to oversupply, and demand is expected to weaken due to higher inventory, according to Mizuho’s top analyst Vijay Rakesh. The good news? Rakesh has cut his price target by only one buck.
In a research note issued to clients, Rakesh reiterated a Buy rating on MU stock while lowering his price target from $45 to $44, which implies about 11% upside for the stock.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Rakesh has a yearly average return of 20.9% and a 61% success rate. Rakesh has an average return of 42.8% when recommending Micron and is ranked #81 out of 5,289 analysts.
Rakesh noted, “Our checks indicate 1H19 Memory is still weak as DRAM and NAND pricing trends for MarQ/JunQ continue down 20%/10% q/q. 1Q DRAM pricing has been modestly weaker at low-20% down q/q.” As such, “We are adjusting our MU estimates to reflect potential weaker DRAM/NAND pricing in the FebQ/MayQ. Our FebQ goes from $6.0B/$1.76 to $5.9B/$1.71 with estimated DRAM/NAND price declines of ~16%/18% q/q to ~18%/20%. For the MayQ our Rev/EPS goes from $6.1B/$1.60 to $5.8B/$1.52 with estimated NAND pricing going from down 5% q/q to down 10% q/q. F19E Rev/EPS goes from $26.4B/$8.04 to $25.8B/$7.83 and F20E from $27.4B/$7.12 to $26.4B/$6.80. Maintaining our MU Buy – adjusting PT to $44 from $45 ~6.5x our F20E EPS. MU reports earnings on March 20.”
Because Micron’s industry ebbs and flows, any significant short-term decline doesn’t make investors push the panic button so quickly. Macro events that are out of Micron’s control may force the company’s stock down, with many investors not looking at this as here to stay in the long-term.
All in all, MU stock has drawn optimism mixed with caution when it comes to consensus opinion among sell-side analysts. TipRanks analysis of 23 analyst ratings shows a Moderate Buy rating, with 16 analysts recommending Buy, seven saying Hold and one suggesting Sell. The average price target among these analysts stand at $50.41, which represents a 27% upside. (See MU’s price targets and analyst ratings on TipRanks)