Micron (MU) Price Target Declines but Rating Unchanged - Susquehana
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Rating Summary:
43 Buy, 9 Hold, 2 Sell
Rating Trend: Up
Today's Overall Ratings:
Up: 20 | Down: 14 | New: 22
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Susquehana analyst, Mehdi Hosseini, is remaining positive on Micron (NASDAQ: MU) after the most recent miss. Despite a challenging 2015 and uncertainties associated with ASP trends, DRAM cost is down and industry-wide strict bit capacity adds are expected to help with margin stabilization.
Feb Q guidance was materially below consensus driven in large part by weakness in DRAM margins. Specifically, DRAM ASPs have continued to decline more aggressively than expected, while unit costs remain plagued by the confluence of a costly 20nm transition as well as lower unit cost absorption.
MU remains focused on ramping 3D NAND by the end of CY16, however, pricing in TLC Planar NAND remains under pressure, particularly in Consumer apps.
During the quarter blended DRAM ASPs declined 13% Q/Q while cost/bit declined only 10%. Furthermore, MU expects sluggish PC demand to remain into the May-Q.
On the other hand, as the company continues to shift production to 20nm, and DDR4 (higher ASP), they believe that this headwind could ease, particularly into 2H16. Furthermore, the renegotiated Inotera agreement / closing of the purchase of Inotera should benefit DRAM cost/bit in F2Q16 / F2H16, respectively.
Reducing FY16 and FY17 EPS to $0.44 and $1.57 from $1.28 and $2.09. Lower estimates lead to a lower PT, now $17 down from $22, However, he is not downgrading the stock to Neutral because he believes DRAM margins can bottom in 1HCY16. MU benefits from a better product mix, higher mix of 20nm DRAM, and improved cost absorption from volume ramps.
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 $14.61 yesterday.
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