UPDATE: Bank of America Downgrades Micron Technology on Valuation, Limited Upside Potential
In a report published Friday, Bank of America analyst Simon Dong-je Woo downgraded the rating on Micron Technology (NASDAQ: MU) from Buy to Neutral, but reiterated the $20.50 price target.
In the report, Bank of America noted, “We downgrade Micron from Buy to Neutral without changing either our estimate or price objective ($20.50). In fact, the share price has already tripled YTD, reaching a 10-year high. Of course this is consistent with the 3x higher EPS we expect in FY14 vs FY12 (from minus $1.0 to plus $2.0). Our model still shows a decent increase in FY15-16E EPS, but not as strong as in FY13-14E. Thus, we apply about mid- to upcycle fair value, or 30-40% higher than the historical average PBR (1.8x vs 1.3x), to derive our PO. Since we still worry about the cyclical risk, our revaluation (2x fair PBR or higher) would be exercised when FY14-15E EPS exceeds $2.5. Our EPS appears slightly below consensus now (15 Buys, 13 Holds, 3 Sells - Bloomberg).”
Micron Technology closed on Thursday at $19.99.
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