Micron (MU): Trouble for the Stock? Not Really


Many investors are excited about Micron’s (MU) long-term perspectives but are getting a bit more fearful on the short-term. Fears of a demand slowdown in the chip market are making analysts reconsider price targets. MKM analyst Ruben Roy is one of those analysts. Roy is still bullish on Micron’s stock, but has lowered his price target to $50 from $63, which implies about 45% upside from where the stock is currently trading. (To watch Roy’s track record, click here)

Roy says that “demand trends appear to have deteriorated into year-end, and consequently, we are taking a more conservative approach to our DRAM ASP assumptions.” The analyst is also concerned with “complexities related to DRAM scaling” and “likely capex cuts”, which he expects will “limit bit growth over the next few years.” 

Nevertheless, the analyst expects longer-term “DRAM trends (to) remain largely positive given the likely-hood that DRAM content will continue to increase across multiple end markets as emerging applications, such as AI/machine learning, benefit from more efficient memory usage and lower memory latency.” His long-term expectations is keeping his price target high.  

Looking at NAND, the analyst believes that deteriorating “sell-side and buy-side ASP expectations for NAND ASPs…appear to be catching up with reality,” with current estimates for fiscal 2019 standing at about -29% year-over-year. As a result, Roy is reducing his FY2019 “NAND ASP forecast to down -33% from down -28%.” But looking towards the end of 2019, the analyst says, “capex cuts could lower supply growth to the lower end of industry expectations for 35% to 40%-bit growth in 2019, which could potentially improve supply/demand balance later in 2019.” Similar to his view on DRAM, the late-2019 story remains different for the analyst, as he believes the stock will recover.  

Where does the rest of the Street side on this chip giant? It appears mostly bullish, as TipRanks analytics demonstrate MU as a Buy. Out of 25 analysts polled in the last 3 months, 17 are bullish on Micron stock while seven remain sidelined and only one is bearish. With a return potential of nearly 66%, the stock’s consensus target price stands at $58.30. (See Micron’s price targets and analyst ratings on TipRanks)

 

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