Morgan Stanley Sees Persistence Headwinds For Micron Even As Memory Prices Start To Lift

Morgan Stanley analyst Joseph Moore reiterated an Underweight rating on the shares of Micron Technology MU with a price target of $58.50.

Micron reported quarterly losses of $(1.07) per share, which beat the analyst consensus estimate of losses of $(1.18).

The company reported quarterly sales of $4.01 billion, which beat the analyst consensus estimate of $3.91 billion.

While memory prices are improving, the company guided to over $1.1 billion of losses in the peak seasonal quarter, which would be $1.7 billion if not for the $600 million benefits from selling previously reserved inventory, said the analyst.

While pricing should improve as older pricing deals fall off, there are large headwinds for the next two quarters as they run out of reserved inventory, cautioned the analyst.

The analyst sees Micron as extremely disciplined but just doesn't see that goldilocks scenario playing out for the industry as a whole.

The following are the positives for Micron, according to the analyst. Micron is clearly characterizing that pricing has bottomed, gross margins are continuing to rise, bit growth in NAND was +40% q/q, though volumes will be down in November.

The analyst said that despite minimal AI benefit today, the company remains very confident that it will get there.

The analyst noted that pricing rebounds as desperation eases, but this is still an obviously oversupplied situation.

Key will be how the normalization of depressed fab utilizations plays out. The company had a positive view on that topic, but the analyst remains cautious.

Price Action: MU shares are trading lower by 4.41% at $65.20 on the last check Thursday.