Summit Research Sees 'Tailwinds Galore' For Micron Technology

Summit Research Partners reiterated its Buy rating and $50 price target on Micron Technology, Inc. MU Wednesday citing “tailwinds galore” for the stock.

Analyst Srini Sundararajan noted that "MU's forward P/E hovers around 8 when both the underlying markets DRAM and NAND are likely to grow 15 percent and 10 percent at least per industry sources (notwithstanding MU's specific sub-segments of focus exhibiting higher growth such as mobile and server DRAM and Enterprise SSD.”

Sundararajan commented that “even Seagate Technology trades at a 11x multiple with not as much growth in the underlying markets.”

Currency was another tailwind.  The note claimed “a 1 percent Yen drop is equivalent to at least $3M in reduced costs” for the company and may result in an uplift for the stock.

“In 1H15, MU is likely to use TLC NAND in its SSD.  In 2H15, MU plans to proliferate the use of TLC into more products.  TLC is 20 percent cheaper and for some applications, with the right controller technology, the customer does not care,” according to the Sundararajan.

Other tailwinds included demand for DRAM, share buybacks and Inotera contract re-negotiations.

The “2015 estimates remain at a below-consensus $3.50 though we expect upside to our numbers upon further modeling.”

Sundararajan concluded by noting that the “price target remains at $50 based on 14x F15EPS of $3.50 plus the effect of the buyback resulting in $0.10 in EPS, or $1.40 in stock price.”

Micron Technology closed Thursday at $34.45, up 1.83 percent.