Micron (MU) announced yesterday that it is exercising its right to buy Intel’s (INTC) stake in IM Flash Technologies, a joint venture between the two companies. The deal includes a $1.5 billion cash payment and will see Micron take over Intel’s debt to the enterprise, which is about $1 billion. The two semiconductor giants formed IM Flash Technologies when they started working on 3D XPoint memory in 2006.
Mizuho’s top analyst Vijay Rakesh commented, “With almost $6B invested between MU/INTC, and the lone 3D Xpoint fab, we believe this gives MU a strategic lead developing high speed memory for AI, similar to the Elpida Graphics/mobile DRAM acquisition for MU. We believe the Intel 3D Xpoint Optane solution has seen interest from hyperscale OEMs for accelerating the AI roadmap training and manipulating big data.”
“MU sees no material financial impact to its F19 capex or LT capex targets, which remain in the low 30% of revenue range. Looking out MU expects to control its own 3D Xpoint roadmap, development and drive margins and could be key to the LT secular AI and deep learning enterprise data center roadmap,” the analyst added.
As such, Rakesh reiterates a Buy rating on MU stock, with a price target of $60, which implies an upside of 46% from current levels.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Vijay Rakesh has a yearly average return of 22.2% and a 59% success rate. Rakesh has a 46.4% average return when recommending MU, and is ranked #79 out of 4893 analysts.
Wall Street tends to agree with Rakesh’s confidence on the chip giant, considering TipRanks analytics reveal MU as a Strong Buy. Out of 22 analysts polled in the last 3 months, 17 are bullish on Micron stock while 5 remain sidelined. With a return potential of nearly 63%, the stock’s consensus target price stands at $66.38. (See MU’s price targets and analyst ratings on TipRanks)