Goldman Sachs analyst Mark Delaney downgraded Micron Technology (MU) to Neutral from Buy and lowered his price target for the shares to $50 from $68. The stock closed yesterday down 3%, or $1.10, to $42.50.
The analyst, who is not making a call on the upcoming fiscal Q4 results on September 20, sees weaker fundamentals for DRAM and NAND in calendar Q4 and the first half of 2019. Delaney expects Micron’s gross margin to decline sequentially from Q4 of 2018 through mid-2019, and he notes that the stock is historically well correlated with the company’s gross margin. His view of margin declines is due to lower memory average selling prices, both from more “challenging” DRAM conditions and also NAND oversupply.
Further, Delaney notes that his 2019 earnings per share estimate for Micron is now 31% below consensus expectations. Memory downturns usually last for several quarters and can see an acceleration in price declines, as customers delay procurement to wait for lower prices, the analyst tells investors in a research note.
