Micron Technology (MU) PT Lowered to $90 as UBS Sees the Reset as Complete

UBS analyst Timothy Arcuri lowered the price target on Micron Technology (NASDAQ: MU) to $90.00 (from $95.00) but maintained a Buy rating seeing this quarter as a reset that will allow the company to meet expectations for results and guidance in the coming quarters. The key points to the reset are:

1) FQ1 (Nov) guidance was well below expectations on revenue but only just a touch below investor bogeys on EPS with margins holding up well as a tight inventory position maximizes mix.

2) FQ2 suggests a low $7B revenue number which implies ~$1.75-1.80 EPS, a range many investors will probably see as a sufficient reset as this embeds little to no bit growth or cost reductions, both of which should hockey stick higher from there in May and August Qs.

3) the company is also suggesting that Feb Q is the bottom in FCF. while DRAM pricing is always a wildcard, this implies a FQ2:22 (Feb) bottom in gross margin - exactly what investors need to start to become more constructive.

The analyst stated "All of this argues for another strong year in 2022 and provides a favorable “up and to the right” trajectory for annual revenue and EPS. On the back of the expectations reset, we cut estimates but our PT comes down only just slightly from $95 to $90 and we maintain our Buy rating, reiterating our multi-year secular bull view on industry fundamentals and stock re-rating potential as a result."

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