Brean Initiates Micron With Buy Rating, $14 Price Target

Micron Technology, Inc. MU faces easier comps in 2H16 and 2017, helping it generate EPS growth. Brean Capital’s Mike Burton initiated coverage of the company with a Buy rating and a price target of $14.

DRAM

The DRAM industry has been in consolidation mode for the past decade. Currently, there are three providers which cater to over 90 percent of the market. “Logically, we believe the overriding consequence of consolidation will result in more disciplined supply growth in order for players to maximize profits,” analyst Mike Burton commented.

He added, however, that the space was capital-intensive, and there could be “supply-driven up and down cycles” similar to what was witnessed in 2013-2014 and then 2015-2016.

About 54 percent of Micron’s business is DRAM used in desktop PCs and Notebooks. While unit demand for client PCs was weak in Q1, business is likely to “normalize and grow” in the back half of 2016, Burton said. He added that Micron was “executing on ramping its 20nm manufacturing technology to achieve double-digit bit growth and related cost reductions by FQ3 in DRAM.”

NAND

The company’s 3D NAND ramp appears to be on track for significant bit growth and reduction in cost per bit in the fall of 2016.

“We argue that as we move through the back half 2016 and demand begins to pick up and company-specific cost cuts come to fruition, earnings could rise off a depressed base,” Burton added.