Wedbush: Micron Now Worth $5/Share Less, Company Faces Short-Term 'Pain'

In a report published Friday, Wedbush analyst Betsy Van Hees maintained an Outperform rating on Micron Technology, Inc. MU, while lowering the price target from $31 to $26. The analyst believes that the company is facing "self-inflicted" but short-term "pain" due to some necessary process transitions. While the company's lower than expected FQ3 results were not surprising, given the weakness in PC DRAM, the analyst believes that the FQ4 guidance was disappointing and led to a sharp decline in the stock in afterhours trading. Micron Technology guided to significantly lower than expected top line for FQ4, while revising the revenue guidance to well below the consensus and the estimates. "MU noted continued DRAM ASP declines from PC and cloud servers as it shifts its mix towards mobile and DDR4," Van Hees reported. The analyst believes that excluding PCs, demand is stable and that the lowered guidance was driven by one-quarter issues, such as the shift in the DRAM product mix from PC to mobile, transition from DDR3 to DDR4 and the typical higher cost and lower yields during the early stage of 20nm transition. "We believe the story isn't structurally broken and with the bar set very low, we view the sell-off in AHs as overdone, creating a compelling entry point," Van Hees added.