Forget Falling Chip Prices, Micron Stock Is Cheap -- Barrons.com
12:40 PM ET 3/18/19 | Dow Jones
By Tae Kim
Two Wall Street analysts are recommending Micron Technology stock even as memory-chip prices keep falling, citing the inexpensive valuation of the chipmaker's shares.
The back story. Micron shares have rallied about 24% so far this year in anticipation of a sector recovery in the second half of the year. The chip maker is a leader in the DRAM and NAND memory semiconductor market.
DRAM refers to dynamic random-access memory, used in desktop computers and servers. NAND is flash memory, which is used in smartphones and solid-state hard drives.
Earlier this month, industry research firm TrendForce said DRAM pricing has fallen by about 30% so far in the first quarter.
Micron is slated to report its second-quarter earnings results on Wednesday. Its shares are down 0.2% to $39.45 on Monday.
What's new. Credit Suisse analyst John Pitzer on Sunday reiterated his Outperform rating for Micron stock, citing the cheap valuation of its shares.
On Micron's December earnings call, the company said it saw a decline in demand from its cloud computing customers. Near-term memory "shipments are well below bit consumption and against the backdrop of U.S. cloud [demand] returning in April-May time frame, supply/demand is improving and at equilibrium exiting CY19," Pitzer wrote. Micron's "valuation remains attractive."
The analyst noted the shares are trading at 3.4 times forward enterprise value to Ebitda [earnings before interest, taxes, depreciation and amortization] versus its historical average trough of 7.6 times.
In similar fashion, MKM Partners analyst Ruben Roy on Monday also reaffirmed his Buy rating, telling clients to look at Micron's long-term future.
"We continue to view MU positively, from a longer-term perspective, given our view that demand for higher-value memory products will continue to increase over the next several years," he wrote.
On the flip side, Susquehanna Financial Group's chip analyst Mehdi Hosseini said on Monday he is still pessimistic about Micron because of uncertainty over future earnings. He reaffirmed his Neutral rating for the stock.
Looking ahead. Credit Suisse's and MKM's price targets for Micron remains $90 and $44 respectively, while Susquehanna stays at $35. |
