Here is color on Gerra's downgrade. He is still predicting $9.78 in 2019 along with a $32 PT. So he believes that the stock should be valued at a little more than 3x earnings along with a GM of 50% [shakes head, rolls eyes, mutters OMG]. Of course, he had a $100 PT and a $75 PT earlier in the year and the stock never got to either one of those targets, so maybe 32 is safe.
The person who wrote this piece needs to learn more about the memory market. Hynix is the second largest memory vendor, not Micron.
Micron Technology Stock Can Fall Even More, Says Analyst -- Barrons.com
DOW JONES & COMPANY, INC. 12:10 PM ET 11/20/2018
Micron Technology (MU) stock will suffer from plunging memory prices for a long time, according to Baird analyst Tristan Gerra.
He lowered his rating to Underperform from Outperform for Micron shares, citing his lower forecast for the company's profits.
"Continued deterioration in both DRAM and NAND pricing leads us to model eight consecutive quarters of gross margin and EPS contraction," Gerra wrote on Tuesday. "NAND outlook continues to worsen, with contract pricing expected to decline mid teens in each of the next two quarters."
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 drives.
Micron stock dropped 1.6% to $36.24 on Tuesday. Its shares are down more than 20% over the past three months as investors get more concerned about a deteriorating semiconductor cycle.
Gerra slashed his price target for Micron to $32 from $75, implying that the stock can slip about another 12%.
The analyst expects DRAM memory production capacity will rise by 10% to 15% per year over the next two years. He forecast DRAM prices will drop by 30% to 35% next year.
As a result, Gerra predicts Micron's gross profit margin will fall to 50% by 2020 from 71% earlier this year. He lowered his fiscal 2019 earnings-per-share estimate for Micron to $9.78 from $11.00.
Micron is the second-largest producer of memory in the world. It owns memory-wafer factories in the U.S., Singapore, Japan and Taiwan.
Write to Tae Kim at tae.kim@barrons.com |
