Micron Technology, Inc. (MU) Gets Price Target Boost Despite Racing NAND Fears Through the Street

Morgan Stanley's Joseph Moore notes that though his colleague points to dipping NAND flash chip prices threatening ahead, this just marks under a third of MU's business.

Micron Technology, Inc. (NASDAQ:MU) shares were hit with an almost 12% loss in the tail-end of last week after Morgan Stanley’s Kathryn Huberty downgraded a chip making rival Western Digital, fearing NAND flash chips have hit their crowning point in the market.

However, Morgan Stanley analyst Joseph Moore has responded in quite an opposite turn, going to bullish bat against apprehensive analysts on the Street.

Not only does the analyst reiterate a Buy rating on MU stock, he lifts the price target from $39 to $55, which implies a 29% upside from current levels. (To watch Moore’s track record, click here)

Maybe NAND prices will face a waning, Moore acknowledges, but this marks a fraction of the chip giant’s business. Amid a technology “global sell off” running amiss, the analyst is placing all his chips on DRAM, asserting that Micron’s growth earnings power remains meaningful. Therefore, any share weakness should be seen in bullish light for intrigued investors.

Moore argues: “NAND is less than one third of the business at Micron. (It has 20 points less gross margin than DRAM, also, so it contributes much less than one third of profits – however, this can be misleading, as a lost point of margin on one third of the business has the same impact no matter what the starting point.) […] Micron is down over 10% since then, due to several factors: our global call, a selloff in tech YTD outperformers across the board including names that have nothing to do with memory, and a few unsurprising data points on potential for NAND supply loosening up early next year (MRVL commentary, DRAM-exchange commentary). We stand by our NAND comments, which saw some pushback, but feel strongly that DRAM should remain strong, that Micron should have significant earnings growth potential from here, and that this pullback is an opportunity.”

TipRanks data shows Micron in strong standing among analysts on the Street, earning a Strong Buy among experts polled in the last 3 months. This is a tech giant who has seen 22 bulls rooting for its prospects out of 25 analysts, with just 3 standing on the sidelines. The 12-month average price target reaches $52.55, marking a 25% upside from where the shares last closed.

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