Quite a lot of analyst chatter on Micron Technology (NASDAQ:MU) yesterday ahead of the company’s announcement of financial results for the fiscal second quarter ended February, which are due on Wednesday. In general, the Street seems to be trying to see the bottom in DRAM pricing - and for NAND pricing.
While there is growing belief that the Q2 results could miss Street estimates, expect the outlook for the May quarter and beyond to get most of the attention later this week.
Tristan Gerra, an analyst with Robert W. Baird, yesterday raised his rating on the stock to Outperform from Neutral, based on the theory that DRAM pricing will trough in May. He also asserts that NAND Flash “should generate positive gross margin” starting in the fiscal 2008 first quarter; and he asserts that image sensor pricing is stable despite an over-capacity situation. “Micron is slated to gain significant share at PC and mobile phone OEMs as a one-stop shop supplier,” he wrote in in a research note. “Gross margin cycles for Micron are now more muted than in the past. The Micron story is more than just a cyclical DRAM investment, in our view.” On the other hand, Gerra trimmed his fiscal 2007 estimate to a loss of 10 cents a share from a profit of 75 cents.
Offering a more skeptical view, Jefferies & Co.’s John Lau yesterday trimmed his price target on Micron to $12 from $13, citing the “weak outlook for memory prices.” Lau trimmed his estimate for the August 2007 fiscal year to 27 cents from 56 cents; for 2008 he went to 50 cents from 93 cents. “We remain concerned about a lack of catalysts in the DRAM market despite the much hyped impact of Microsoft Vista,” he wrote. “NAND pricing has been improving lately, but we believe that respite is temporary and will be dampened by increasing capacity. Micron may also face pressure in sensors due to weakness at Motorola (MOT).” Lau maintains a Hold rating on the stock.
ThinkEquity’s Eric Ross yesterday morning asserted that the February quarter could come up short of expectations; and he expects the May quarter guidance could do the same. “Investors are hoping that [the second half] will be the driver, and although public statements are optimistic (mainly due to Vista), privately DRAM makers are expressing concern,” he says. Ross repeated his Accumulate rating and $13 price target on the stock.
Alex Gauna, an analyst at UBS, likewise asserts that February quarter sales and estimates are likely to be below estimates “given steep DRAM and NAND ASP declines and mixed handset market indications.” Gauna nonetheless asserts that “fundamentals are approaching a bottom,” and repeats his Buy recommendation on the stock (on the other hand, he trimmed his fiscal 2007 EPS estimate to 24 cents, from 33 cents).
Yesterday morning, Micron shares were up 6 cents at $12.14.