How Low Can Micron (MU) Stock Go?

Can’t say I didn’t warn you.

That’s what Micron Technology (MU) CEO Sanjay Mehrotra is probably thinking to himself, after the company released quarterly numbers yesterday. The CEO had warned investors late last month that quarterly revenue would be near the low-end of estimates, as the company is suffering from a DRAM and NAND downcycle. Now, the chip giant issued an earnings guidance warning that the fall would continue; the company is expecting revenue between $5.7 and $6.3 billion and EPS between $1.65 and $1.85. Analysts on average had forecast adjusted earnings of $2.39 a share on revenue of $7.26 billion.

Amid news of the poor guidance, MU shares are diving nearly 4% to $32.81.

BMO Capital Markets analyst Ambrish Srivastava expects the slide to continue; the analyst has lowered his price target from $38 to $32, while maintaining a Market Perform rating. (To watch Srivastava’s track record, click here)

Srivastava “bristle[s] at Micron’s characterization of the current downturn as an ‘air pocket,’” as the company is cutting capital expenditures and lowering production for both DRAM and NAND. The analyst says his estimates are going “a lot lower,” as the “downturn appears broad, ranging from mobile to data center to enterprise.”

Looking forward to 2019, Srivastava estimates a 24% reduction in revenue in FY2Q19 (quarter-over-quarter), with EPS declining to $1.75. The analyst also expects DRAM and NAND shipment to continue decreasing, 7% and 10%, respectively between FY2Q19 and FY3Q19, with ASP also falling double digits.

Even with his Market Perform (hold) rating, Srivastava is among the most bearish on Micron’s stock. His $32 price target is tied for the lowest of 25 analyst price targets on TipRanks. That said, Wall Street is still optimistic on the stock, with 16 analyst recommending Buy, ten recommending Hold and one recommending Sell. Overall, there is a $51.09 price target average among the analysts, representing a 53% upside from current levels. (See MU’s price targets and analyst ratings on TipRanks)

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