Micron (MU) Price Target Reduced to $29 at Goldman Sachs; Analyst Notes DRAM Warning Signs

Goldman Sachs maintained a Neutral rating on Micron Technology (NASDAQ: MU) and lowered its price target to $29.00 (from $32.00). The change follows Q1 results and guidance. Analyst Mark Delaney said soft Q2 guidance included some potential warnings signs in DRAM.

"We believe there were some negative developments for DRAM: (1) On supply/demand (S/D), Micron noted some price pressure in PC DRAM. This is in contrast to last quarter when PC OEMs had negotiated three month contracts and pricing was firm. More pronounced weakness in PCs (20-25% of DRAM demand) could impact S/D in other markets if capacity is reallocated. While Micron’s plan to grow bits slightly below the market in 2015 will help to maintain pricing, we believe that record high DRAM margins (we estimate that Samsung’s commodity DRAM EBIT margins are over 50%) will continue to attract supply from competitors," said Delaney.

"We estimate DRAM capex was up about 55% in 2014 and will be up 10-20% yoy in 2015E. (2) Rising capex (and opex) costs will likely remain a headwind for cost per bit. Micron guided DRAM cost per bit to be flat in 2QFY. We believe positives were improved FCF ($923 mn vs. just $20 mn in 4QFY14) and relatively stable blended DRAM and NAND ASPs," he added.

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 $32.87 yesterday.

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