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Cowen Remains Positive on Micron (MU) Following CQ2 Results from Inotera

July 28, 2015 8:57 AM EDT
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Price: $93.78 +0.57%

Rating Summary:
    43 Buy, 9 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 8 | Down: 4 | New: 35
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Cowen and Company is out with commentary on Micron (Nasdaq: MU) following Q215 earnings results from Inotera. Cowen rates Micron at Outperform with a price target of $30.

Analyst Tim Arcuri briefly commented, Inotera reported DRAM sales down 12 percent Q/Q (-24 percent Y/Y) to TWD16.2B (Consensus TWD 17.3B) as FX and ASP declines (likely in both PCs and servers) more than offset in-line bit shipments (+1 percent Q/Q vs. guide of “flat-to-up”). Bit shipments continue to be negatively impacted by the process migration to 20nm (from 30nm) and shift to DDR4 (we estimate ~15 percent die size penalty) with DDR4 shipments (on 30nm) representing ~35 percent WSPM in June (vs. ~30 percent WSPM guide and 20 percent WSPM in Q1).

Arcuri continued with a read-through for Micron: Despite low volumes, Inotera continues to make progress on 20nm (~11K WSPM) that should enable MU to achieve its expectation of >50 percent bits on 20nm in 1H:16. We continue to think that MU’s shift to 20nm should result in 1) incremental wallet share given a greater ability to service the high-end PCs, graphics/mobile and server markets (in order) as they transition to 6Gb and 8Gb densities (LP3, LP4 and DDR4); 2) improved productivity savings (we estimate high teens, especially as yields improve); and 3) gross margin tailwinds given a greater portion of DRAM mix. Higher costs associated with the migration from mobile to PC and aggressive push to 20nm is exacerbating weak top line performance at both Inotera and MU during one of the worst demand environments in PCs since the last decade.

We continue to like the risk/reward for MU amid the low-bar set by consensus, and the structural changes in memory have only just begun to play out that argue for more stable pricing, limited irrational behavior by peers and higher cash flows.

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



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