MKM Still Bullish On Micron

Micron Technology, Inc. MU stock is down nearly 40 percent in the past six months, but one Wall Street analyst said Thursday that a softer near-term outlook does not impact the longer-term bullish thesis for the stock. 

The Analyst

MKM Partners analyst Ruben Roy reiterated a Buy rating on Micron and lowered his price target from $63 to $50.

The Thesis

Micron will likely report another difficult quarter next week and could be in for a challenging year in 2019, Roy said in a note. (See his track record here.)

MKM is forecasting revenue growth of under 20 percent next year and is taking a more conservative approach to its DRAM pricing models, the analyst said. In addition, Roy said he is not confident that Micron will be able to offset near-term declines in NAND prices via cost-cutting alone.

Despite the challenging memory market, Roy said Micron should be able to maintain solid margins and profitability in 2019.

“We believe that longer-term DRAM trends remain largely positive given the likelihood that DRAM content will continue to increase across multiple end markets as emerging applications, such as AI/machine learning, benefit from more efficient memory usage and lower memory latency,” he said. 

On the NAND front, Roy said deteriorating 2019 pricing expectations finally seem to be falling in-line with reality, and falling supply could help rebalance the market by the end of next year.

Even after cutting 2019 EPS estimates, Roy said Micron stock still trades at a forward earnings multiple of just 3.8x, less than half its five-year average of 8x.

Price Action

Micron shares were down 0.76 percent at $35.76 at the time of publication Thursday. 

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