UBS Remains Bullish on Micron Technology (MU) Following Mixed 2Q
UBS maintained a Buy rating on Micron Technology (NASDAQ: MU), and cut the price target to $14.00 (from $15.00), following the company's mixed 2Q earnings report.
Analyst Stephen Chin commented, "F2Q results were once again mixed as Micron continues to face pricing uncertainties that are partly offset by steady execution on process transitions and bit cost reductions. A key topic in focus was the path for gross margin improvement as DRAM margins declined to 21-22%. We believe gross margin increases could be moderate going forward given the soft demand backdrop, but are encouraged that ASPs of c.$4/GB remain well above cash costs of c.$2.10. We also view the inventory build neutrally as it is the result of the maturing 20nm DRAM process that is seeing strong yields. After a -20% QoQ drop in F3Q, we estimate DRAM revenues could decline low-single % in F3Q on higher bit shipments. We believe growth prospects remain positive for Server DRAM sales (-1% QoQ) on cloud/data center demand, and Mobile (-40% QoQ) is expected to recover with C2H smartphone seasonality after F2Q product qualification delays. We believe Micron is on track to achieve 15-25% DRAM bit cost reductions in FY16 as 20nm supply is expected to crossover with 25/30nm output this quarter."
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Shares of Micron Technology closed at $10.48 yesterday.