Baird Turns Incrementally Bullish On Micron, Cites Stronger Memory Outlook

Shares of Micron Technology, Inc. MU have gained more than 45 percent since the beginning of the year, but the stock still has room to run, according to Baird.

The Analyst

Baird Equity Research's Tristan Gerra maintains an Outperform rating on Micron's stock with a price target lifted from $60 to $100.

The Thesis

An incrementally bullish stance on Micron's stock is justified based on the company's memory trends and the outlook in both DRAM and NAND, both of which appear to be stronger than previously expected, Gerra said in a Friday report. 

PC DRAM contract pricing is likely to increase by 8 to 10 percent in the first quarter of 2018, which is "well above" seasonal pricing, the analyst said. Data center DRAM contract prices are likely to increase by 5 to 6 percent in the same time period, and these strong pricing trends will likely continue into the second quarter, he said. 

NAND prices are declining, but the rate of decline appears to be "more muted" than previously expected, Gerra said. Contract pricing is likely to fall 3 to 4 percent in the first quarter and by a higher single-digit rate in the second quarter, according to Baird's forecast. Throughout the full year, NAND contract pricing is likely to fall by 15 to 20 percent, which is less than previously expected and likely less than Micron's targeted production cost reductions this year, Gerra said. 

A better-than-expected outlook in memory not only lifts Micron's stock valuatio,n but reaffirms the stock's status as a top large-cap idea for the second straight year, according to Baird. 

Price Action

Micron shares were up 1.66 percent at the time of publication Friday morning. 

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