Micron Technology (MU) PT Raised to $100 at Nomura/Instinet; Sees Another Major Breakout

Nomura/Instinet raised its price target on Micron Technology (NASDAQ: MU) to $100.00 (from $55.00) while maintaining a Buy rating.

Analyst Romit Shah said after consolidating over the last 3-4 months, they believe MU shares are in the early stages of another major breakout.

The price target hike is mainly related to multiple expansion. "We see DRAM pricing resuming an upward trend in Q2, a first-time dividend and share buyback announcement in May, continued margin expansion in NAND and increased M&A discussion as important catalysts," the analyst said.

They believe their target price incorporates a conservative valuation methodology. "As shown on Figure 1, we simply assume that MU trades back to a 3-year average multiple relative to the S&P 500 (-42% vs. -67% currently), semiconductor sector (-34% vs. -60% currently) and several comps including Applied Materials (-27% vs. -54% currently), Lam Research (-23% vs. -56% currently) and Samsung (+10% vs. -11% currently). On a blended basis, the target multiple is 10x, versus 6x currently. This implies a target of $89 on consensus FY19 EPS of $8.90 and a target of $122 on our FY19E EPS of $12.22. We have weighted these two outcomes to derive a $100 target."

They also raised FY19E EPS from $11.78 to $12.22 and is meaningfully above consensus of $8.90, which assumes lower revenues and EPS next year.

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