Micron Technology, Inc. (MU) in Good Shape to Ride Stable DRAM Uptrend and Demand

We would be buyers of Micron approaching the FQ3 print and Apple event, says top analyst.

After presenting at rival Citigroup’s Global Technology Conference, Micron Technology, Inc. (NASDAQ:MU), top analyst Vijay Rakesh at Mizuho has emerged pleased with memory pricing and demand trends alike, pointing to an encouraging DRAM contract uptrend and stability that is set to continue through the back half of the year.

Especially as more and more semiconductor manufacturers turn to 3D capacity storage, voices in the conference echoed that the industry bodes well for bit growth into 2018, further feeding demand without over-satisfying to the point of surplus. In fact, with NAND supply continuing to swim below demand, Micron is aware of this “tightness,” and nonetheless is trying to shift over to 64-L Gen2 and Gen3, with the industry evolving to 48-Layer. With rising cash flow, Micron is hoping to keep its DRAM and NAND bit growth aligned with the industry, aiming to “lean into its 2018 Capex for the NAND technology transitions,” explains the analyst.

Rakesh highlights, “MU feels good about DRAM contract on a steady uptrend and still below the stronger DRAM Spot, a positive heading into 2H build season. While mobile DRAM demand had been a little weak with the China handset weakness, the situation continues to improve. Server DRAM demand remains strong with increasing content tailwinds.”

In reaction, the analyst reiterates a Buy rating on shares of MU with a price target of $38, which implies a 17% increase from current levels.

While the chip giant is readying to release third fiscal quarter earnings come September 26th, Rakesh confidently asserts, “We would be buyers on MU heading into earnings,” particularly “with the Apple event next week on Sep-12.”

Anticipating a beat is well within reach for Micron thanks to “conservative” expectations, the analyst concludes: “With MU’s NovQ consensus of flat q/ q topline, we believe its continuing 1x nm DRAM ramp and 64-L 3D-NAND should drive bit growth upside to consensus and our unchanged estimates. For perspective, in the MayQ MU’s DRAM bit growth was up ~6% q/q and NAND was up ~17% q/q. With most new fabs from Hynix only coming in 2019E, we believe 2018 will see mostly incremental wafer capacity adds in existing fabs, conversion from older NAND to DRAM or continuing technology conversion.”

Vijay Rakesh has a very good TipRanks score with a 72% success rate and a high ranking of #30 out of 4,633 analysts. Rakesh garners 26.7% in his yearly returns. When recommending MU, Rakesh gains 46.7% in average profits on the stock.

This top analyst is not the only one throwing a bullish parade for the chip giant. When listening to the word on the Street, consensus points to the bulls, as TipRanks analytics exhibit MU as a Strong Buy. Out of 19 analysts polled by TipRanks in the last 3 months, 17 are bullish on Micron stock while 2 remain sidelined. With a return potential of nearly 31%, the stock’s consensus target price stands at $42.14.

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