Why BofA Is Bullish On Micron Despite Huawei Challenges: 5 Takeaways

Micron Technology, Inc.’s MU earnings remain strong and its stock valuation is attractive despite the Huawei issue and a guidance cut, according to BofA Securities.

The Micron Technology Analyst: Simon Woo maintained a Buy rating on Micron Technology and reduced the price target from $70 to $67.

The Micron Technology Thesis: The ban on Huawei chip sales and the sales erosion reflected in Micron Technology’s fiscal first-quarter guidance are likely to have only a "low-single-digit impact on its valuations" given the company's cash flow generation and earnings growth, Woo said in a Thursday note. (See his track record here.)

The recent stabilization in dynamic random-access memory spot prices — and the rally expected thereafter — is likely to lead to above-trend average selling prices in the fiscal second quarter and beyond, the analyst said. 

He named five takeaways from a call with Micron Technology’s investor relations head:

• While recent Huawei sales exposure is below 10%, it could become nil from Sept. 15.
• Global smartphone demand is likely to continuously recover with non-Huawei OEMs and 5G growth.
• Increasing chip production for non-Huawei customers is easier.
• Cloud will likely offset enterprise demand weakness.
• Huawei's impact will be much smaller in the fiscal second quarter, and the supply-demand outlook will become more normalized.

MU Price Action: Shares of Micron Technology were trading down 1.25% at $44.40 at last check Thursday. 

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Photo courtesy of Micron.