Susquehanna Weighs in on Micron Technology, Inc. (MU) as Samsung Builds New Lines for DRAM Production

Susquehanna analyst Mehdi Hosseini is out with a research note on Micron Technology, Inc. (NASDAQ:MU), following the news that Samsung is expanding its 10nm production lines and constructing new facilities for 7nm chipsets, in preparation for 2018. The analyst comments on how the news would affect Micron and the DRAM’s supply/demand balance.

Hosseini wrote, “For DRAM, we do not believe an “announcement” in of itself is reason to be concerned about excess supply and the capitulation of the current cycle. In fact, we believe historical context comes in handy, and we point to Samsung’s 2014 Pyeongtaek announcement for 3D NAND production as a proof point, as Pyeongtaek will begin ramping production 2H17 (almost 3 years after announcement).”

“In that context, we believe a more holistic approach to supply/demand is necessary, and we contend that the fate of the current “up” cycle in DRAM (and for NAND as well), will be determined by end-market demand, 3D NAND yields, and company-specific technology advancements and cost curve execution, as opposed to fab announcements, as we believe supply currently remains rational. Additionally, in the DRAM market, the migration from 20nm to 18nm, and then to 15m will not be as easy as previous migrations simply due to increased cost that multi patterning causes. Until EUV insertion for DRAM is ready, some wafer capacity may be needed to meet DRAM bit demand,” the analyst continued.

Hosseini reiterates a Positive rating on Micron shares, with a price target of $25, which represents a slight downside potential from current levels.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mehdi Hosseini has a yearly average return of 7.1% and a 54% success rate. Hosseini has a -2.0% average return when recommending MU, and is ranked #872 out of 4545 analysts.

Out of the 32 analysts polled in the past 12 months, 29 rate Micron stock a Buy, while 3 rate the stock a Hold. With a return potential of 0.9%, the stock’s consensus target price stands at $26.28.


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