Micron's Debt Needs Raise Risk, Susquehanna Warns Amid Downgrade

Susquehanna’s Mehdi Hosseini downgraded the rating for Micron Technology, Inc. MU from Positive to Neutral, while reducing the price target from $15 to $10. The analyst expects the company’s balance sheet to be under further pressure.

Although Micron Technology’s margins are expected to bottom soon, the confluence of softer DRAM, uncertain NAND trends due to ASP pressures, and a debt raise associated with Inoetra have raised the company’s long-term risks, analyst Mehdi Hosseini mentioned.

Inoeta Synergies Undefined

The additional debt is expected to put the company’s balance sheet under pressure and raise debt service costs, thus affecting profitability. Inoetra synergies remain undefined with “die penalty” associated with mobile and server DRAMs, offsetting the cost synergies expected from the consolidation, which would prevent meaningful gross margin expansion, Hosseini added

The EPS estimates for FY16 and FY17 have been reduced from $0.33 to $0.11 and from $1.49 to $0.48, respectively.