Susquehanna Nearly Doubles Micron Price Target: 'Industry Dynamics Are Improving'

Micron Technology, Inc. MU stock has surged 55% through 2019. While performance may stall in 2020, one analyst anticipates a strong swell in 2021. 

The Analyst 

Susquehanna Financial Group analyst Mehdi Hosseini upgraded Micron from Neutral to Positive and nearly doubled the price target from $45 to $85.

The Thesis

Hosseini anticipates a near-term drop in average selling prices and accordingly cut Susquehanna's 2020 bottom-line estimates. (See the analyst's track record here.) 

The analyst expects earnings acceleration in 2021 as DRAM and NAND ASPs begin steady improvement in the second quarter of 2020.

“All in all, we now see improving fundamentals, with February-quarter EPS marking the bottom,” Hosseini said.

“MU faces company-specific challenges such as the migration of NAND technology. But, industry dynamics are improving with increased prospects of tightness and shortages by mid-2020.”

By Susquehanna's estimates, the stock has priced in any downside risk and the corporate narrative should improve in 2020.

“We believe the worst-case ASP and margin profile is now dialed into expectations, with increased prospects of a meaningful recovery in revenues in the latter part of 2020, which combined with significant operating leverage should help the company to exit FY20 with at least $0.65 of quarterly earnings and on the path to well more than $2 of earnings exiting FY21,” Hosseini said. 

Micron is set to report first-quarter earnings Dec. 18, and Hosseini said he anticipates in-line results.

Price Action

Micron shares were trading 4.77% higher at $53.46 at the time of publication Monday. 

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Photo courtesy of Micron Technology.