In a report issued Friday, Baird analysts Tristan Gerra and Jaime A. Viteri downgraded shares of Micron Technology, Inc. MU to Neutral, while trimming their price target from $36 to $15. They anticipate blended DRAM pricing could tumble by more than 20 percent by the beginning of next year, “down to fully loaded costs before capacity cuts take place.”
The Downturn
Moreover, the note added, PC DRAM pricing could fall by more than 30 percent between the present and early 2016, as PC units may be flat – sequentially- in the third and fourth quarter of 2015, while softness in wireless and enterprise servers lingers.Other reasons for the current downturn – and sources of concern – are the weakness in mobile DRAM (driven by China sales and the Samsung Galaxy S6) and the consequent excess channel inventories, which are falling, but still at five to six weeks.
The experts then highlighted that the downcycle is still expected to be less significant than previous ones, mainly on the back of industry consolidation. In fact, they do not see DRAM pricing to reaching cash costs – a non-negligible detail. In addition, they assured that “node migration means capacity will exceed demand again in 2016 unless production cuts take place.”
Furthermore, the analysts continued, average DRAM content could fall with Windows 10’s pricing structure to PC OEMs, which means many new PCs may only feature 2GB DRAM content.
Shares of Micron are up more than 1 percent on Friday trading.
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