Micron Technology (MU)

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Micron Technology, Inc (MU) Stock Set For A Rebound: Raymond James
Raymond James expects Micron Technology to rebound in near-term, reiterating Strong Buy rating on the stock

By: LARRY DARRELL
Published: Jun 18, 2015 at 12:47 pm EST

According to a research note published on Thursday, Raymond James has reiterated Strong Buy rating on Micron Technology, Inc. (NASDAQ:MU) stock. The sell-side research firm hosted meetings with Micron this week and came away with the impression that once the quarterly results are printed and guided next week, the stock price is set for a rebound into second-half of 2015 as PC DRAM headwinds subside.

Raymond James noted that DRAM inventories are low at approximate 3 weeks from 5-6 weeks a few months back, indicating that Micron is shipping on well below sell-through. The problem arises from the fact that Samsung is still suffering the consequences of a DRAM mix-shift last year to PC from mobile, creating a shortage in mobile DRAM but exacerbating PC DRAM prices in the context of an already weak PC environment.

Notably, non-PC DRAM including mid to high-end server, mobile, networking, and embedded, currently shows solid performance, if not strong. Additionally, NAND is also stabilizing and starting to see pockets of tightness at the component level. Micron’s 20 nm yields are doing well with material growth targeted for fourth-quarter calendar-year 2015 (4QCY15).

The firm also noted that the node transition beyond 20 nm for DRAM will not scale to historical Moore’s Law trends, meaning that for capacity to get out of a whack for a prolonged period, it would need to come largely from wafer additions rather than die shrinks. The firm believes that this might be the angle the Street is missing for those looking just beyond the horizon.

Raymond James analyst, Hans Mosesmann stated, “We believe the recent correction reflects immediate-term PC headwinds, with shares significantly undervalued given mid- and long-term growth opportunities in mobile and server DRAM as well as meaningful leverage in NAND.”

According to Bloomberg, 25 rate Micron stock a Buy, six tag a Hold, while only three advocate a Sell. The consensus 12-month price target on the stock is $36.79 showing an upside potential of 48.5% on the current trading price.
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