Here's Why Nomura Downgraded Micron Technology

In a report published Tuesday, Nomura analyst Romit Shah downgraded shares of Micron Technology, Inc. MU to Neutral from Buy with a price target lowered to $30 from a previous $40.

Shah noted that the Street perceives Micron to be undervalued as consolidation in DRAM drives sustainable cash flow growth, less price competition, and rational capital spending. However, the analyst added that SAMSUNG ELECT LTD SSNLF is a major player that is gaining "a lot of share" while Micron has lost a couple hundred basis points of share.

"Micron is undershipping demand in DRAM, as technology migrations limit supply output," Shah wrote. "Micron also seems behind on technology transitions."

However, Shah also stated that Micron's long-term plan is to sustain market share and as such the company is likely to oversee bigger investments in 2016 to boost capacity in DRAM and migrate technology in NAND.

Bottom line, Shah stated that consensus estimates for the May period are too high.

The analyst lowered his calendar year 2015 earnings per share estimate to $3.35 from a previous $3.65 while 2016 earnings per share estimates were also lowered to $4.00 from $4.86.

Shares of Micron traded recently at $30.21, down 3.3 percent.