Cowen Affirms Micron (MU) at 'Outperform' Amid Boosted Q1 Guidance; Positive on China Talks

Cowen and Company affirms Micron (Nasdaq: MU) at Outperform with a price target of $22 after the company updated Q1 expectations at a competitor conference today.

Analyst Tim Arcuri commented today: MU sees EPS (ex SBC) of $0.28, well above its prior range of $0.13-$0.21, 4 pennies above our estimate and nearly a dime above Street’s $0.19. Robust DRAM pricing is helping lift revenue toward $3.975B (midpoint), which is $200MM above our current expectation and $250MM above Street, and GMs to 25.5% (midpoint) that is in-line w/ our estimate and 100bps above Street.

The company reiterated that Inotera should close on 12/6, setting FebQ the first quarter that will be inclusive of Inotera. The company also indicated that Inotera should be accretive to DRAM GMs, EPS and FCF.

We still feel that negotiations with China are deeply ongoing that would allow MU to reduce leverage and help fund future CapEx requirements. We have previously written about MU’s Rights Agreement and its implications and conclude a JV between Chinese SOE (Yangtze River?) and MU is possible that would give MU a big up-front capital infusion that it could then de-lever its balance sheet and reinvest to catch up in DRAM.

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