UPDATE: Wells Fargo Sees Upside in Micron (MU) and Raises Rating to Outperform

(Updated - September 29, 2015 9:21 AM EDT)

Wells Fargo trimmed estimates on Micron Technology (NASDAQ: MU) but upgraded the stock from Market Perform to Outperform and a price target of $16-$19. The price target is based on a 9x-10.5x multiple of Wells Fargo's FY17 EPS estimate of $1.80. Analyst David Wong noted that this multiple is consistent with where Micron has traded in the past.

"We are upgrading Micron to Outperform from Market Perform, as there is now upside potential from the current stock price to our valuation range," said Wong. "We are reducing our estimates on Micron, prompted in part by the ongoing slide in DRAM pricing over the last few weeks and our view that there is broad based softness in most electronics end markets. Our FY 5 GAAP ESP estimate falls to $2.31 from a prior $2.38, and our FY16 GAAP EPS estimate falls to $1.10 from a prior $1.35. We are introducing our FY17 GAAP EPS estimate of $1.80. Our $16- 19 valuation range is based on approximately 9-10.5x our FY17 EPS estimate."

"Although we believe that there are many near terms risks for Micron in particular and the memory industry in general, we believe that memory industry financial dynamics have improved in recent years, with some amount of consolidation in the DRAM industry (e.g. the dissolution of Qimonda and the acquisition of Elpida by Micron) and efforts on the part of the major DRAM and NAND manufacturers to improve margins and capital efficiency. Over the last two years, Micron has demonstrated a clear ability to generate profits and cash, in our view," added the analyst.

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 $14.06 yesterday.

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