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JPMorgan Sees An Inflection In Micron's Q3 Sales

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Despite the weak DRAM pricing environment, F3Q could mark the bottom for revenue and margins at Micron Technology, Inc. (NASDAQ: MU), JPMorgan’s Harlan Sur said in a report. He maintained an Overweight rating on the company, with a price target of $15.

Inflection Likely In August Quarter

Micron has continued to face a soft DRAM pricing environment through its May quarter. The company is likely to be “at the cusp of a long-awaited improvement in pricing fundamentals,” analyst Harlan Sur mentioned, adding that pricing may be boosted by a seasonal improvement in demand and continued supply discipline. In fact, DRAM pricing had turned positive in recent weeks.

NAND demand appears to be relatively strong, while initial 3D NAND supplies are coming to the market, Sur noted. “With demand (and pricing environment) improvement along with Micron’s cost reduction initiatives as a result of 20nm DRAM and 3D NAND transitions, we see Micron’s revenue and margins inflecting higher in the August quarter, which we expect to be viewed favorably by investors.”

If Micron’s 20nm mobile DRAM qualification at Apple Inc. (NASDAQ: AAPL) is successful, it should result in significant bit growth in the August quarter ahead of the upcoming iPhone 7 launch. If, however, there are qualification delays, it would be negative for bit and revenue growth, and expert pressure on Micron’s stock, the analyst stated.

“We remain OW MU and look for indications of revenue/margin inflection as well as continued execution on its technology migration and customer qualifications,” Sur added.

Latest Ratings for MU

May 2017Standpoint ResearchDowngradesBuyReduce
May 2017Goldman SachsDowngradesBuyNeutral
Mar 2017MacquarieInitiates Coverage OnOutperform

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