Bernstein's 'Worst Fears Are Confirmed' At Micron

In a report published Monday, Bernstein analyst Mark C. Newman maintained an Outperform rating on

, while lowering the price target from $45 to $28. The analyst said that the "worst fears" regarding the 20nm DRAM shrink in F3Q15 had been confirmed. "Micron's DRAM cost guidance of up low single digits confirms our worst nightmares on their problematic 20nm DRAM shrink. DRAM margins will fall substantially in FQ4'14 and the stock is dead money until the company can prove that the shrinks are back on track," Newman explained. The analyst believes that the 20nm DRAM shrink related challenges had been underestimated. However, the issues being faced by Micron Technology are company-specific, which suggests that the selloff of SK Hynix might not be a good idea. "In fact, Samsung Electronics and SK Hynix are likely beneficiaries of Micron's continued low bit growth due to shrink challenges," Newman stated, adding that "far more worrying was their guidance on DRAM cost, which is actually guided UP low single digits for FQQ4'15."