Nomura Cuts Micron Price Target To $25

In a report published Friday, Nomura analysts maintained a Neutral rating on Micron Technology, Inc. MU, while reducing the price target from $28 to $25. The analysts identify PC weakness as a near term issue, saying that this continues to result in oversupply, exerting pressure on Micron's pricing and margins. "We are cutting MayQ/AugQ estimates due to on-going softness in pricing, as a result of the weak PC backdrop which has persisted longer than we suspected," the analysts explained. The analysts believe that the August-quarter consensus DRAM growth estimate of +8 percent q/q appears too aggressive, in view of the expectation of an inflection in PC demand that could continue till the end of summer. Micron could achieve about 3 percent revenue growth, given the assumption of a 5 percent decline in ASPs and a 9 percent rise in bit shipments, driven mostly by mobile and server. The EPS estimates for AugQ, CY15 and CY16 have been reduced from $0.75 to $0.61, from $3.20 to $2.83 and from $3.75 to $3.33, respectively. The free cash flow estimate for CY16 has been reduced from $2.41 per share to $1.74 per share. "Longer-term issues include a lagging technology roadmap, which should further pressure margins and FCF," the report added.