By Sarah Roden
Analysts have differing views regarding how Micron Technology, Inc. (MU, Financial) will be impacted by the decline of personal computing. Jefferies analyst Sundeep Bajikar noted that the PC market represents 30% of Micron’s DRAM memory chip business. However, this means that the remaining 70% of Micron’s DRAM business remains in good form.
Concerns about a pricing war in the DRAM market were reflected in Micron’s 2Q15 earnings released on April 1, when the company attributed lower revenues to a decrease in the average selling price of DRAMs. Micron’s 3Q15 revenue guidance is between $3.8 billion to $4.05 billion, the midpoint of which is nearly a 6% sequential decrease.
Despite DRAM pricing and demand concerns, Sundeep Bajikar is still bullish on Micron. On May 15, the analyst reiterated a Buy rating on Micron noting that the so-called price war is not a viable threat. From the Jefferies 2015 Global TMT Conference, Bajikar noted, “Micron sounded positive about overall trends in DRAM demand and pricing, and expects its competitive position in NAND to improve significantly starting in 2015, with transitions to triple-level cell (TLC) and 3D.” Prices for non-PC DRAM chips are likely to remain the same or even decrease 1% or 2% in the next quarter, but Micron warns that DRAM supply may be constrained in the second half of the year. Aside from DRAM chips, Bajikar noted that Micron has strong demand for eMCP chips in Chinese smartphones.
Sundeep Bajikar has rated Micron 20 times since March 2012, earning a 60% success rate recommending the stock with a +43.2% average return per rating. Overall, Bajikar has a 65% success rate recommending stocks with a +26.8% average return per rating.
However, not everyone is so positive on Micron’s DRAM market. Romit Shah of Nomura Securities reiterated a Neutral rating on Micron with a $25 price target on May 15. Unlike Bajikar, Shah believes that the oversupply of DRAM chips is a real issue for Micron and he is worried about Samsung as a competitor. He notes that a “lagging technology roadmap” could pose as a longer-term issue for Micron. Shah continued, “While Micron is not expecting meaningful contributions from 20nm DRAM until 2H15, we believe there is added risk that 20nm ramp to maturity could take longer than expected.” Lastly, Shah warned that the technology gap between Samsung and Micron creates a “cost disparity that is a risk to Micron’s margins.”
Romit Shah has rated Micron 8 times since December 2013, earning a 25% success rate recommending the stock with a +1.3% average return per rating. Overall, Shah has a 55% success rate recommending stocks with a +7.5% average return per rating.
On average, the top analyst consensus for Micron on TipRanks is Moderate Buy.
