Morgan Stanley Downgrades Micron After Stock's 97% Run

Sometimes, even good stocks in strong markets eventually run out of steam. Micron Technology, Inc. MU is up 97 percent in the last year, and one analyst said Thursday that the remaining upside is limited.

The Analyst

Morgan Stanley analyst Joseph Moore downgraded Micron from Overweight to Equal-Weight and reiterated a $65 price target.

The Thesis

After Micron’s incredible run, Moore said the stock is fully valued.

“We see memory markets as structurally improved vs. history, but still think that current valuations price that in, leaving little room for upside,” the analyst said. (See the analyst's track record here.) 

Morgan Stanley remains cautious on NAND pricing, but mostly optimistic about the DRAM market for the remainder of 2018. The firm’s latest round of checks suggest DRAM pricing could be slightly positive in the third quarter and roughly flat in the fourth. NAND pricing could be down 30 percent year-over-year in Q4, Moore said.

Micron is now priced for perfection, and any disappointment in the company’s fundamentals in coming quarters could be punished severely by the market, the analyst said. 

While there’s no reason to immediately sell the stock at current levels, investors should keep in mind the unpredictability of the memory market, Moore said. Clear evidence of memory market strength carrying over into early 2019 would be needed before Micron could see significant upside from $60, the analyst said. 

While he is cooling on Micron, Moore said he said he is warming up to Western Digital Corp WDC and said investors should look to buy the stock on any weakness related to NAND pricing in the second half of the year.

Price Action

Micron shares were down 5.88 percent at $58.89 at the time of publication Thursday morning. 

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What Wall Street Thinks Of Micron's Investor Day

Wall Street Analysts Remain Bullish On Micron