Micron Valuation At 'Historical' Low; Morgan Stanley Sees 80% Upside

• Shares of Micron Technology, Inc. MU have dipped 65.33 percent over the past one year, dropping to a low of $10.05 on January 20.
• Morgan Stanley’s Joseph Moore has maintained an Overweight rating on the company, with a price target of $18.
• At the current valuation, Moore believes that the stock has downside protection as long as the company is able to effectively manage balance sheet risks, although there could be upside with even a modest market improvement.

Analyst Joseph Moore pointed out that the stock valuation was approaching the lows seen in 2012 on various metrics and that “there was too much optimism in that sentiment the last two years.”

Discussions with investors suggest that there are expectations of the share price falling to $6, the level at which it bottomed out in 2012.

However, Moore pointed out that the stock was approaching the same valuation already, “on P/B, EV/S, trailing P/E, and replacement value, given Micron's substantial acquisitions of incremental capacity.”

Moore believes that the fundamentals are likely to continue to be difficult in the first half of 2016, although there could be a recovery in the second half.

“We think that recent spot market stability in DRAM shows that there isn't panic in the market, but we do expect further weakness to evolve short term,” Moore explained.

Apart from a modest recovery in 2H, Moore expects Micron Technology’s cost structure to improve significantly from the May quarter.