Micron (MU) Stock Doing Poorly, Is it Worth Holding Onto?
Shares of Micron (MU) are nearing a 52-week low, not coincidentally after getting a double downgrade from Baird on Tuesday. The analyst changed the rating from Buy to Sell and lowered the price target from $75 to $32. Micron stock is struggling and those who have their eye on the chip giant are noticing. Blogger Bill Maurer is one of those people: “I think Micron may be a good name to own once the dust settles, but we may need another quarter or two to reach that point.” And there you have it! But where is this coming from? (To watch Maurer’s track record, click here)
Maurer says a major issue for Micron has been the pricing for DRAM and NAND: “The analyst sees NAND contract pricing falling in the mid-teens for the next two quarters, which he believes will mean a streak of eight consecutive quarters of gross margin and EPS contraction for Micron. Since the company issued downside guidance for the current quarter (November 2018 period) a few months ago, analyst estimates have been trending lower …” Maurer explained.
“It is kind of funny in a sense that every time we get a negative piece from an analyst regarding earnings, the stock drops which would help the buyback over time, thus improving earnings per share to a point. The only problem is if management spends too much at too high a price, then it is wasting money and the share count won’t come down that fast. Unfortunately, the recent drop in the stock means management in the short term has struck out,” Maurer added.
In sum, the blogger suggests another guide down from the chip giant at the next month’s report is a possibility. Additionally, he recommends management discuss its buyback strategy. Six months ago, the board of directors permitted a $10 billion share repurchase plan that’s goal was to return a minimum of 50% free cash flow to investors. Maurer says the plan is losing.
Not everyone looks at Micron stock as harshly, however. The consensus price target of $61 still shows an upside of about 68%. TipRanks reviewed the analysts on board and found 15 are bullish, 8 are sidelined and 1 is bearish. (See MU’s price targets and analyst ratings on TipRanks)