Investors looking for trading ideas for a period of macro-economic uncertainty may be interested in Srini Sundararajan's recommendation: Micron Technology.
In a report published Friday, Sundararajan offered six points to support his bullish thesis on Micron.
1. DRAM Content
DRAM content is "increasing" through the spectrum of mobile devices. Of note, the iPhone 6s has a mobile DRAM capacity of 2GB, while the iPad Pro will feature 4GB of mobile DRAM. Meanwhile, Android phones are likely to feature "at least" 3GB (if not higher) of mobile DRAM capacity.
2. Bit Demand
Mobile bit demand, according to Sundararajan, is growing at 50 percent, while server bit demand is growing 40 percent.
3. DRAM Technology
Micron "sees no problem" in achieving half the bits shipped at 20nm by the third quarter 2015 at a better gross margin compared to today.
4. New Contract
A new contract with Inotera will likely yield an "attainable" mid- to high-single digit gross margin improvement.
5. Samsung's Struggles
SAMSUNG ELECT LTD(F) SSNLF has "not been making satisfactory profits" in their smartphones, while DRAM and NAND remain its "main avenue" of profitability. As such, Samsung is "much less likely" to "tank" DRAM prices.
6. NAND Growth
Finally, the "fraction" of NAND in the form of TLC (triple-level-cell) will increase to 40–50 percent starting from a minimal revenue from TLC in the fourth quarter 2015.
Bottom line, Micron's upcoming two quarters are still "recovery" quarters, which provide investors an opportunity to acquire shares "bit by bit" while DRAM pricing stability improves. These quarters also provide the advantage of "macro related" Micron stock weakness.
Shares remain Buy rated with an unchanged $25 price target.
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