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MU has strong buy and price is set to double
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Emcee:  albertaft Type:  Moderated

MU of course is a very strong company, but I will admit, Barron's report claiming the price could double (or more) has really gotten my attention.

Hot Research: Can Micron Stock Double Again? -- Barrons.com
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8:04 AM ET 7/5/17 | Dow Jones
(The companies mentioned in Hot Research are subjects of research reports issued recently by investment firms. Their opinions in no way represent those of Barrons.com or Dow Jones & Company, Inc. Some of the reports' issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed. Share prices at the time the report was issued and the date of the report are in parentheses.)

Micron Technology (MU: Nasdaq) By Pacific Crest Securities ($31.47, June 29, 2017)

Can Micron Technology double again?

Micron (ticker: MU) has more than doubled since last summer, and it's possible the stock could double again. If demand holds up, Micron could post earnings per share of over $6 next year, and a 10 times multiple could push the stock over $60.

However, we expect memory pricing to begin to decline in the second half for both DRAM and NAND, which will likely impact margins and act as a headwind. We view upside potential to around $40 as more realistic, with upside if the Toshiba- Western Digital (WDC) joint-venture dispute results in lower NAND supply, and downside if Samsung meaningfully increases DRAM capacity.

Micron is improving its technology and benefiting from strong memory pricing, which is supporting high margins and EPS. We are raising our estimates meaningfully, and they could move higher if the Toshiba-Western Digital dispute results in NAND supply constraints. Still, we remain Sector Weight as we expect memory pricing to soften later this year and Micron remains behind Samsung in DRAM technology.

Micron posted fiscal-third-quarter (ended May) gross margin around 100 bps above our model, helped by strong memory pricing and ongoing technology transitions. Micron suggested that memory demand will remain high into 2018, while its industry supply forecasts for both DRAM and NAND were unchanged, a good setup for high profits moving forward. Fiscal-fourth-quarter (ending August) guidance was well above consensus, though a significant raise was expected.

We are raising our estimates to reflect fiscal-fourth-quarter guidance and the likelihood of high margins moving forward as memory supply remains rational. While we are constructive on the stock, we expect DRAM pricing to begin to decline moderately in the third quarter and we see the potential for significant NAND price declines in the fourth quarter/first quarter as competitors race to ramp 64-layer 3D NAND; we expect memory price declines to act as a headwind, limiting upside. We would prefer to buy opportunistically in this market environment.


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