Micron (MU) couldn’t ask for much better (or worse) timing with its fiscal forth-quarter report on Thursday afternoon, as the stock has been trading in an exceptionally violent way lately, dropping nearly 30% from the recent highs at $62.50. The earnings are going to be closely watched by not only its shareholders, but analysts across the sector. That Q4 report could help end the pressure in the stock — or portend another leg down.
Ahead of earnings, MKM analyst Ruben Roy reiterates a Buy rating on MU, while cutting his price target to $63 (from $77), which represents a potential upside of 43% from where the stock is currently trading. (To watch Roy’s track record, click here)
Roy commented, “We continue to believe that complexities related to DRAM scaling will limit bit growth to ~20% or less over the next few years although current investor expectations appear to factor in a more challenging supply environment, in our view. On the NAND side, we are less optimistic about the rate at which MU’s cost downs associated with the ramp of 64L will offset ASP declines. Net, we are modestly reducing our 2019 estimates, with our above consensus EPS estimate moving lower mostly on lower gross margin assumptions.”
“We continue to view MU positively, from a longer-term perspective, given our view that demand for higher-value memory products will continue to increase over the next several years as emerging applications that rely on data, such as AI, continue to proliferate. While near-term concerns, particularly around the NAND environment, will likely weigh on shares even after a potential estimate reset after fiscal Q4 earnings, we believe that the broader demand environment, coupled with company specific drivers such as continued technology related cost reductions and the commencement of a large share repurchase plan, should provide support,” the analyst added.
Overall, Wall Street loves this chip giant, which has earned one of the strongest consensus ratings, with TipRanks analytics exhibiting MU as a Strong Buy. Based on 23 analysts polled in the last 3 months, 18 rate a Buy on Micron stock. The 12-month average price target stands at $77.27, marking over 70% upside from where the stock is currently trading. (See MU’s price targets and analyst ratings on TipRanks)