Attention High Risk/Reward Tolerance Investors: Look At Micron

Tight supply-demand dynamics and rising prices in the memory cycle will likely enable Micron Technology, Inc. (NASDAQ: MU) to return to year-over-year earnings and revenue growth in F2017, Loop Capital Markets’ Betsy Van Hees said in a report.

She maintained a Buy rating on the company, with a price target of $27.

“With the positive DRAM data points and our industry checks continuing to point to favorable near-term NAND supply/ demand dynamics, we recommend investors with a higher risk/reward tolerance take advantage of the recent weakness to add to positions,” Van Hees wrote.

Positive DRAM Data Points

According to DRAMeXchange data, DRAM spot ASPs [average selling prices] have risen by 12 percent in January to $3.17. Prices have increased by 23 percent quarter-to-date.

“We view the continued momentum upward in DRAM spot pricing as a positive indicator that we will see continued increases in contract prices as there is a large delta between spot and contract pricing,” Van Hees mentioned.

PC Shipments

Gartner’s PC shipment data for Q4 2016 indicates a -3.7 percent year-over-year decline, with a 5.3 percent sequential increase in PC shipments, which “we view as a positive read thru to MU and the PC supply chain,” the analyst added.

NAND Supply

Industry checks continue to point to tight NAND supply. While the DRAM supply-demand dynamics are expected to remain favorable through 2017, since no additional capacity is expected to come on line from the DRAM suppliers, the NAND supply-demand dynamics are expected to be in balance in the back half of the year, as memory suppliers ramp 3D NAND fabs, Van Hees stated.