Micron Catalysts Having Largely Materialized, Goldman Removes From Buy List
Mark Delaney of Goldman Sachs believes Micron Technology, Inc. (NASDAQ:MU) is well positioned to beat Street estimates in the coming quarters, but this isn’t enough to maintain a bullish stance.
Delaney downgraded shares of Micron from Buy to Neutral with a price target lowered from $32 to $30. The analyst believes Micron’s catalysts have mostly materialized since the stock was added to its “Americas Buy” list in late February. The issue has generated a 20-percent return since then.
Justification For The Downgrade
Delaney noted the DRAM market is heading into its fifth consecutive quarter of margin expansion and from a historical perspective upturns last anywhere from four to nine quarters. As such, the analyst believes the DRAM upturn is now in the middle to latter stages, and there are some signs pointed toward an end in the cycle.
Delaney expanded that his recent industry checks found “slowing spot price momentum” in DRAM and to a lesser extent in NAND.
The analyst’s call is also based on the fact that DRAM semi cap investments have risen 46 percent year-over-year over the past two quarters in aggregate while NAND is higher by 109 percent.
Delaney also noted increased supply in the bottom half of 2017 and 2018 will contribute toward a “more normal pricing” environment.
Bottom line, Delaney’s prior bullish thesis has mostly played out and the company is no longer expected to notably beat Street estimates moving forward — a view that isn’t necessarily shared among Wall Street’s analysts.
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