Micron Shares Edge Lower Following Needham Downgrade To Underperform

Needham’s Rajvindra S. Gill downgraded the rating for Micron Technology, Inc. MU from Hold to Underperform, while removing the price target. He expressed concern regarding the sluggish PC market impacting DRAM pricing, vulnerabilities in mobile DRAM and similar trends in NAND.

DRAM Pricing

Although Micron's DRAM bit mix shift has been moving away from PC and towards a more stable mobile market for several quarters, there has been no slowdown in the ASP decline, analyst Rajvindra Gill said. ASPs have declined by 4 percent, 10 percent, 7 percent and 13 percent in the last four quarters.

PC Shipment Rebound Not In Sight

Total PC shipments declined by about 10 percent in 2015, and IDC has projected an additional 3 percent decline in 2016. Gill mentioned that Notebook vendors had indicated another 10 percent decline in shipments in 2016, following a lackluster start to the year.

NAND: Profitability Could Be Offset By Competition

“While MU remains on track with its 3D NAND ramp, we believe it is continuing to play catch-up vs Samsung and has consequently seen limited impact in its model. We believe Samsung remains well ahead and that by the time Micron has enough capacity on 3D to realize cost/bit benefit, Samsung will already have the ability to drive pricing down and largely negate Micron's profitability progress.

The EPS estimates for FY16 and FY17 have been reduced from $0.50 to $0.30 and from $1.30 to $0.75, respectively.