Rosenblatt Securities: Micron's Q3 Shows 'Near-Flawless' Execution

Micron Technology, Inc. MU reported Wednesday afternoon with yet another beat-and-raise quarter, which shows the company is executing "near-flawlessly" in the memory market, according to Rosenblatt Securities. 

The Analyst

Analyst Hans Mosesmann maintained a Buy on Micron's stock with a price target lifted from $115 to $120.

The Thesis

Some of the notable takeaways from Micron's fiscal third- quarter report include the following, the analyst said:

• DRAM sales showed strong momentum across many end markets.
• DRAM average selling price grew by a mid-to-upper single digits quarter-over-quarter.
• A DRAM gross margin of 69 percent marks a new all-time high.
• Memory and storage content continues to increase in most target markets.
• Over 50 percent of the NAND storage business is non-component products, which are "less susceptible" to near-term pricing fluctuations.
• Any momentum in the quarter remains "healthy, broad-based and sustainable" heading into the fiscal fourth quarter.

Micron expects its artificial intelligence business to be a significant driver for memory and storage for AI servers, which require six times the DRAM pf today's servers, Mosesmann said. The company expects nearly half of all servers in 2025 will be AI-capable as opposed to today's low-single digit percentage rate.

Micron's free cash flow generation of around $10 billion, coupled with a $10-billion stock repurchase program, emphasizes the case for owning the equity, the analyst said. Rosenblatt's revised $120 price target is based on a 10 times P/E multiple on a fiscal 2019 earnings estimate of $12.

Price Action

Micron shares were trading higher by 1.65 percent at the time of publication Thursday.

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