Baird Cuts Micron Price Target On Softening Memory Market

The NAND and DRAM markets are showing signs of weakness, and one Wall Street analyst is dialing back his bullish outlook for Micron Technology, Inc. MU.

The Analyst

Baird analyst Tristan Gerra reiterated an Outperform rating on Micron, but removed the stock as a large-cap top idea and dropped his price target from $100 to $75.

The Thesis

Memory market trends suggest Micon margins may be peaking, Gerra said in a Thursday note. (See the analyst's track record here.) 

DRAM pricing will likely peak in Q3, and oversupply in the NAND market has worsened in recent months, the analyst said. Investors shouldn’t expect the NAND market to stabilize until the second half of 2019, and DRAM prices will likely decline moderately in 2019 as well, he said. 

In the meantime, Gerra said inventory deleveraging could represent a headwind for Micron.

“The expectation of lower memory pricing usually induces the supply chain to deplete inventories, which can exacerbate excess supply versus demand." 

Baird reduced its 2019 EPS estimate from $12.50 to $11, although Gerra said Micron stock is still a compelling value at its current price.

Baird is calling for full-year fiscal 2018 revenue of $30.151 billion, below consensus expectations of $30.204 billion. The firm is also forecasting below-consensus fiscal 2019 revenue of $32.322 billion, short of Wall Street expectations of $32.763 billion.

Baird estimates are below consensus on fiscal Q4, full-year 2018 and full-year 2019 EPS estimates as well.

Price Action

Micron stock was down more than 9 percent Thursday afternoon following the mixed commentary.

Related Links:

Q2 13F Roundup: How Buffett, Einhorn, Loeb And Others Adjusted Their Portfolio

Evercore Turns Bearish On Seagate Due To Limited Upside