Micron Technology (MU)

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MU, AVGO, SYNA higher after Mizuho provides bullish coverage

May 22 2015, 12:51 ET | By: Eric Jhonsa, SA News Editor Contact this editor with comments or a news tip

As part of a broader chip stock coverage launch, Mizuho's Vijay Rakesh has assigned Buy ratings to Micron (MU +2.2%), Avago (AVGO +1.8%), and Synaptics (SYNA +2.6%). His targets are respectively $39, $150, and $115.Like other bulls, Rakesh sees Micron's PC DRAM sales (recently under pressure) improving in 2H15, aided by the launch of Windows 10 and Intel's 14nm Skylake CPU platform. He also downplays concerns about Micron's 20nm DRAM transition, thinks tri-level cell (TLC) and 3D NAND ramps will drive NAND gross margin improvement, and likes the hiring of Ernie Maddock as CFO.Rakesh forecasts Avago will continue benefiting from strong FBAR filter sales (boosted by 4G phone growth), growing smartphone dollar content, and the Chinese 4G ramp (aided by recent carrier tariff cuts). "AVGO is completely booked on its FBAR filter capacity through 2015 and the ramp of its industry leading 8-inch FBAR wafer capacity will likely lead to significant operational efficiencies versus its peers"He also notes Cisco is seeing strong sales for its ASR 9000 edge router line, which Avago has exposure to, and expects the Emulex deal to boost margins and EPS.TDDI (integrated touch/display driver) ICs, fingerprint sensor sales, and Chinese 4G demand are expected to act as tailwinds for Synaptics. Rakesh forecasts the company will produce FY16 (ends June '16) free cash flow of $304M, and thinks this could pave the way for buybacks.Synaptics has made fresh highs, and Avago is within $5 of a high of $136.28. Micron remains 25% below a high of $36.59.
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Mizuho: Time To Buy Micron

J.D. Singh , Editor at Vetr News FO
May 22, 2015 9:50am Comments

In a report published Friday, Mizuho Securities analysts initiated coverage of Micron Technology, Inc. with a Buy rating and a price target of $39.

The DRAM industry has been through a period of consolidation, from there being about 9-10 OEMs in 2008 to merely 3 DRAM OEMs currently controlling around 94 percent of DRAM supply. In view of the increasing DRAM complexity and challenges, companies need to focus on profits and margins.

Related Link: Avago Shares Initiated Buy, Mizuho Sees 'Strong' 4G

While the PC market seems weak ahead of the Windows 10 launch and Skylake, the DRAM environment could improve in the second half of the year, with stronger PC and handset ramps. "While MU has been pulling in its 25/20nm DRAM shrink ahead of schedule, we believe the overall higher 20nm DRAM Capex intensity should still keep the focus on maintaining profitability in DRAM," the analysts said.

In the report Mizuho noted, "While near-term DRAM could be weaker given PC weakness ahead of Windows10, 2H15 should see both trends reverse. While NAND remains a show-me story for MU, the key is to get TLC and 3D-NAND to drive GM improvement."

Moreover, the analysts believe that the company's new CFO Ernie Maddock has deep experience with Converts and could meet investors more often, which should help "allay any roadmap concerns."

Latest Ratings for MU

Date Firm Action From To
May 2015 Mizuho Securities Initiates Coverage on Buy
May 2015 JMP Securities Maintains Market Outperform
May 2015 Drexel Hamilton Downgrades Buy Hold
View More Analyst Ratings for MU
View the Latest Analyst Ratings


Posted-In: Mizuho SecuritiesAnalyst Color Initiation Analyst Ratings Best of Benzinga

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