KeyBanc: Micron Positioned For A Q4 Beat And Raise

Memory pricing dynamics are “robust,” and Micron Technology, Inc. MU is benefiting, according to KeyBanc.

The tech company reports its fourth quarter results Sept. 26, and analyst Weston Twigg expects a beat and a raise.

Dynamic random-access memory pricing is projected to increase through the end of the year, and it accounts for about two-thirds of Micron’s revenue, Twigg said in a Tuesday note. That points to the company reaching the high end of its fourth-quarter revenue guidance of $5.7-6.1 billion, according to KeyBanc.

NAND memory pricing is projected by KeyBanc to flatten through the end of 2017, and possibly decline by early next year.

KeyBanc maintained a Sector Weight on Micron.

A Competitive Memory Sector

Micron is partnered with Intel Corporation INTC on 3D NAND technology, and the companies “have highlighted rapid progress in 64-layer 3D NAND yields, cost structure and performance,” Twigg said.

Micron’s 3D NAND die are about 20 percent smaller than their competition, according to KeyBanc.

Micron has an upside to about $42, but KeyBanc maintains a Sector Weight on the stock, “as we’re still wringing our hands over the increasing likelihood of new DRAM capacity” from Samsung and SK Hynix.

With a “lagging” technology position in DRAM and a highly levered balance sheet, Micron’s ability to press its advantage in 3D NAND is limited, Twigg said. But with competitive 3D NAND technology, potentially with the lowest cost-per-bit, as well as a differentiation opportunity with 3D Xpoint, Micron could have long-term upside drivers, the analyst said.

“For now, investors should remain comfortable owning MU.”

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