Micron Technology (MU): Risk/Reward Played Out - Needham
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Needham & Company analyst, Ravindra Gill, reiterated his Underperform rating on shares of Micron Technology (NASDAQ: MU) after the company positively preannounced 1Q17 results due to improved market conditions, predominantly the stabilization for the DRAM market.
The analyst admits that he underestimated positive stock price action due to the improving DRAM environment, but maintains his Underperform rating for two reasons:
1) unfavorable risk/reward with peak multiples
2) major levels of gross/net debt ($10B and $5B)
3) currently, the company is not cost competitive in 3D NAND
Compared to Samsung, MU is at least 2 yrs behind, and as a result of its high cost it is limited from playing in the fast-growing markets. The analyst is concerned that as Samsung transitions to 18nm, MU will again be at a cost disadvantage.
Shares of Micron Technology closed at $19.42 yesterday.
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