Micron Analysts Expect Lukewarm Q1, But Project Coming Inflection In Memory Pricing

Chipmaker Micron Technology, Inc. MU is scheduled to report first-quarter results Wednesday after the close, with analysts on average expecting earnings of 47 cents per share on revenue of $5.02 billion.

The stock received its second sell-side upgrade in as many days Tuesday, with Wedbush turning bullish.

On Monday, Susquehanna upgraded Micron to Positive and nearly doubled its price target. 

The Analysts

Wedbush analyst Matt Bryson upgraded Micron from Neutral to Outperform and lifted the price target from $44 to $65. 

Needham analyst Rajvindra Gill maintained a Buy rating and increased the price target from $60 to $70.

Wedbush Projects Inflection In Memory Pricing 

The first quarter isn't likely to show meaningful upside given continued downward moves in DRAM and mixed fundamentals in NAND, Bryson said in a Tuesday note. 

Wedbush's upgrade is not a call on the imminent first-quarter print, the analyst said. 

With Micron's habit of issuing cautious guidance, Bryson said he expects the second-quarter guidance to be muted or in line with the consensus.

Wedbush's bullish stance is based on expectations that NAND pricing, especially that of SSDs, will inflect upward in the first quarter, he said. 

Periods of positive pricing change are the best time to own memory stocks, the analyst said. 

Wedbush said it is seeing the first signs of improving DRAM pricing thanks to better hyperscale demand.

See also: Longbow Upgrades Micron As Memory Market Fundamentals Improve

Needham Forecasts Mid-2020 Rebound In DRAM, NAND Prices

A mid-cycle recovery is in the offing in calendar year 2020, Gill said in a Tuesday note. 

Historically, a return to a normalized supply-demand balance leads to expansion in P/B multiples closer to the six-year median multiple of 2.1 times versus the current multiple of 1.7 times, the analyst said. 

Seasonality will be pronounced in the second quarter, but it will likely represent a bottom in terms of NAND and DRAM pricing as flash makers in particular approach normalized inventory levels, he said. 

"We expect a significant rebound in NAND and DRAM prices starting in mid-2020 due to multiple catalysts, including 5G smartphones (DRAM content ~2x), a rebound in hyperscaler spending, and normalized supply/demand." 

Needham lowered its first-quarter estimates to reflect seasonality and CPU shortages but increased its 2021 estimates to account for an overall improvement in memory pricing.

Price Action

Micron shares were adding 0.41% to $53.16 at the time of publication. 

Photo courtesy of Micron.