Micron Stock Will Plunge Because the Chip Market Hasn't Hit Bottom, Says Morgan Stanley -- Barrons.com
9:36 AM ET 4/4/19 | Dow Jones
By Tae Kim
Micron Technology stock (ticker: MU) will fall significantly because a rebound in memory prices won't happen any time soon, according to Morgan Stanley.
The back story. Micron shares have rallied more than 30% so far this year in anticipation of a recovery in chip prices later this year.
The chip maker is a leader in the DRAM and NAND memory-semiconductor markets. DRAM refers to dynamic random-access memory, used in desktop computers and servers, while NAND is flash memory, found in smartphones and solid-state hard drives.
What's new. Morgan Stanley analyst Joseph Moore lowered his rating for Micron stock to Underweight from Equal-Weight, citing rising inventories of memory chips.
"We expect DRAM pricing to remain under pressure through 2019 and likely 2020," he wrote on Thursday. "We see a substantially weaker outlook for memory."
Micron shares were down 3.2% to $42.50 in Thursday's premarket session. The company didn't immediately respond to a request for comment.
The analyst predicted that inventory levels at memory makers will climb above 25-year highs by midyear. As a result, he estimated, Micron's earnings for fiscal 2020 will fall short of Wall Street estimates by nearly 60%.
The "growing consensus view that earnings [are] near a bottom this quarter seem too optimistic given producer inventories," he wrote.
Looking ahead. Moore has a $32 price target for Micron stock, implying a loss of 25% from the current level.
Last week, German chip maker Infineon lowered its sales-growth guidance for the fiscal 2019 year to 5% from 9%, citing weaker macroeconomic conditions, especially in China. The forecast reduction could be a sign that fundamentals in the chip market won't recover in the second half of the year.
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