Market Overview

Nomura Nearly Doubles Micron Price Target, Says Semiconductor Maker Has Further Upside Ahead

Nomura Nearly Doubles Micron Price Target, Says Semiconductor Maker Has Further Upside Ahead

Micron Technology, Inc. (NASDAQ: MU) investors seeking to take some profits off the table after the stock's 41-percent gain in 2018 may want to reconsider, as there is room for further upside ahead, according to Nomura Instinet.

The Analyst

Nomura Instinet's Romit Shah maintains a Buy rating on Micron Technology's stock with a price target lifted from $55 to $100.

The Thesis

Shah's bullish stance on Micron's stock dates to June 2016, and the stock has exceeded Nomura's price target nine times, the analyst said in a Monday note. Instead of a modest price target increase, a substantial move higher is justified for four reasons, Shah said: 

  • DRAM spot prices are down a "modest" 3 percent in 2018, but a deep dive into supplier plans shows a desire to increase DRAM prices in the second and third quarter. For Micron, a 500-basis point change in DRAM pricing will impact its annual revenue by $1 billion and EPS by 70 cents.
  • Micron likely held $8 billion in cash at the end of February and will generate $5 billion in cash flow over the next two periods, the analyst said. The company will be in a position to pay the entire convertible note balance it holds, which would prevent a dillutive effect of adding over 60 million shares to the float.
  • Weaker NAND pricing will likely be offset by a stronger mix and lower cost per bit, which would result in ongoing margin expansion in both fiscal 2018 and 2019.
  • Micron is among one of the few remaining chip companies with a growing scale, Shah said. This makes it a potential acquisition target, especially when considering the stock's "attractive" valuation at 5-6x free cash flow.

Price Action

Shares of Micron Technology hit a new all-time high of $58.45 on Monday and were higher by around 7 percent on the day.

Related Links:

Quick Update On Micron's Debt Reduction Progress

Micron Lifts Q2 Guidance; KeyBanc Says Stock Is A Value Among Peers

Photo courtesy of Micron Technology. 

Latest Ratings for MU

Jan 2021Raymond JamesMaintainsStrong Buy
Jan 2021Credit SuisseMaintainsOutperform
Jan 2021RosenblattMaintainsBuy

View More Analyst Ratings for MU
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