Nomura lowers PT for Micron Technology, Inc. (NASDAQ:MU) to $18 from $20


Near-term, analysts at Nomura see a more complicated outlook for Micron Technology, Inc. (NASDAQ:MU) than they previously modeled. As such, the analysts have moved to downgrade their 12-month price target on the stock to $18 from $20. Among other things, the Nomura analysts expect sagging ASPs and oversupply to continue causing havoc to Micron’s fundamentals. However, sometime in 2H2016, the analysts believe that the current challenges in the memory market could start easing up, thus providing an opportunity for Micron’s fundamentals to improve.

Nomura is worried about the weak demand for memory products, especially on the DRAM side. In addition to the pain of soft demand, the firm sees further trouble being caused by oversupply as manufacturing processing shift to 20nm in DRAM production.

Pressure on ASP

Because of the combined problem of weak demand and oversupply, memory ASP has continued to decline and Nomura predicts the situation could remain dire through 2Q2016. As such, the firm foresees negative topline growth for Micron Technology, Inc. (NASDAQ:MU) in 1H2016. Specifically, Nomura estimates that Micron’s topline in the February quarter will decline by 5%. The consensus estimate calls for flat topline growth in the quarter.

Price target cut to $18

It is on the basis of sagging demand and shrinking ASP that Nomura has also cut its 12-month price target on Micron Technology, Inc. (NASDAQ:MU) to $18 from $20. The firm believes that weak fundamentals will pressure the stock of Micron, which is why it is no longer convinced that its previous $20 price target is attainable in the current situation.

Capex cut

Although Nomura notes that there will be industry-wide reduction in 2016 capex, the firm maintains that the cutbacks will do little to help the oversupply situation in the near-term. Nomura estimates that DRAM capex will shrink 6% to $12.8 billion in 2016. Samsung, a large scale memory producer, is expected to cut its 2016 DRAM capex by 10% compared to 2015.



Valuable assets

Nomura suggests that as much as Micron Technology, Inc. (NASDAQ:MU)’s fundamentals will remain under pressure in the near-term, the company’s assets could be pursued by China’s Unis group or Intel Corporation (NASDAQ:INTC). China is working to build its semiconductor industry and owning Micron or a piece of it could bolster the country’s presence in DRAM. Intel could also try to grab Micron to boost its Chinese DRAM operations.

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