Micron's Problem Is Execution, Credit Suisse Says

In a report published Friday, Credit Suisse analyst John W. Pitzer maintained an Outperform rating on

, while lowering the price target from $50 to $34, following the F3Q miss and disappointing F4Q guidance. "While weak PC demand YTD has been a clear negative, weak fundamentals at MU are less about ASPs declines, nothing to do with supply fears, and much more about company specific headwinds," Pitzer explained. The lower than anticipated F3Q results were primarily driven by a decline in DRAM/NAND bit shipments, given that the gross margin for DRAM and NAND was marginally higher than the estimate, while operating expenses were in-line. Micron Technology has guided to F4Q earnings below the estimates due to a decline in DRAM bit growth, as well as increased cost per bit. The company has also guided to a decline in DRAM pricing in F4Q in the high single digits. According to the Credit Suisse report, "Company indicated that conversion to DDR4 is impacting bit growth and cost declines, while 20nm is not yet meaningfully contributing to bit growth… Note that company is unlikely to meaningfully benefit from the 20nm transition in C2H15, but expects to reach crossover for 20nm bits in C1H15." The EPS estimates for FY 15 and FY16 have been lowered from $3.10 and $3.95 to $2.68 and $2.45, respectively.