Micron (MU) Rebound Coming in FY17 - Susquehanna

Susquehanna analyst, Mehdi Hosseini, thinks Micron (NYSE: MU) could be set up for a strong rebound in FY17 if demand strengthens after another near term period of weak demand and increasing CapEx. No change to the Positive rating or $15 price target which is ~10x projected FY17 EPS of $1.49.

FY17 is set up for a strong rebound in margins given the acceleration in cost/bit (for both DRAM and NAND) however, near term the stock may see pressure. The commercialization and adoption of 3D XPoint memory is pushed out from 2016 to 2017, with the mobile market (and not enterprise) as the first adopter. To help expedite the cost/bit reduction, MU's FY16 capex will come at the high end of previously guided range of $5.3B-$5.8B, with $0.7B-$0.8B financed by strategic partners. However, the valuation is attractive when looking beyond FY16 as MU shares currently trade at 0.79x BV (0.82x TBV). With FY17 setting up for a strong rebound in GM/earnings, he believes there is enough earning power to help the shares trade above the BV.

Micron's unit economics should improve C2H16 as 20nm DRAM and 3D NAND ramp, which should be supportive of gross margins. Specifically, Micron is expecting 15-25% cost/bit reduction per year from 20nm DRAM, and 20-30% for 3D NAND. The company expects 20nm DRAM to account for >50% of output in F3Q16 and 3D NAND will represent >50% mix of NAND fab bit output by Fall 2016.

For an analyst ratings summary and ratings history on Micron Technology click here. For more ratings news on Micron Technology click here.

Shares of Micron Technology closed at $10.02 yesterday.

You May Also Be Interested In

• Micron Technology (MU) plans to construct a $100B "Megafab" employing more than 9,000 workers in Upstate NY - Nikkei
• Micron, Biden-Harris Administration, U.S. Senate Majority Leader Schumer Announce $6.1B in CHIPS and Science Act Funding for Historic Planned Investment in Domestic Leading-Edge Memory Manufacturing i
• General Dynamics Corp. (GD) PT Lowered to $320 at RBC Capital