Micron (MU) has become a battlefield stock, as Wall Street analysts debate whether memory chip prices are falling or crashing. What’s interesting, however, is that analysts expect Micron’s earnings to drop, and yet they are valuing MU stock at a reasonable premium to its current price. Analysts’ average target price at the moment is $69.92, suggesting roughly 55% upside from current levels. (See MU’s price targets and analyst ratings on TipRanks)
Now let’s turn from the general to the specific. Today, Mizuho’s top analyst Vijay Rakesh reiterated a Buy rating on Micron shares, while lowering the price target from $65.00 to $60.00, which implies a potential upside of 33% from where the stock is currently trading.
Rakesh commented, “Micron facing challenges but still the better house in a tough neighborhood with a $10B buyback. While DRAM pricing is expected to be down ~3-4% in 4Q, we believe a 14nm shortage and modest server slowdown could drive 4Q18 DRAM pricing down ~5% q/q and seasonally down another 5-7% 1Q19. We believe DRAM prices will stabilize earlier in JunQ 2019, providing a faster normalization for MU. We are already seeing: 1) Hynix (~25% DRAM Share) push out Wuxi DRAM expansion to 2019E; 2) Samsung (~55% DRAM share) cutting back DRAM bit growth expectations for 2019 to 18% y/y (versus 22% y/y bit growth in 2018E); and 3) delaying the 40K wpm DRAM expansion at Pyeongtaek into 2019E. With 1y providing only a “mid-single digit” cost decline we believe DRAM OEMs will be more disciplined. In addition, ~$1.5B of a $10B buyback goes into effect in F1Q19 (Nov) which we believe should drive some upside for MU.”
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 25.1% and a 64% success rate. Rakesh has a 49.6% average return when recommending MU, and is ranked #66 out of 4886 analysts.
Micron shares closed today at $45.15, down $0.08 or -0.18%.