Why BofA Cuts Micron Price Target, But Still Likes The Stock

Although DRAM price reductions caused investor concerns, Micron Technology, Inc’s (NASDAQ: MU) guidance for the first quarter of fiscal 2022 reflects stable margins, according to BofA Securities.

The Micron Technology Analyst: Simon Woo reiterated a Buy rating for Micron Technology while reducing the price target from $125 to $105.

The Micron Technology Thesis: While the quarter ending February is seasonally weak, there is likely to be minimal price cut pressure, Woo said in the note to clients.

He cited three reasons for this:

• Low inventories among competitors
• Strong chip demand for servers and mobiles
• Channel inventory restocking in view of a worsening of the memory chip supply shortage

“We model 2Q FY22 GAAP GM/OPM at 45%/33% (with only 3% DRAM ASP decline). This is far higher than FY19-21 average,” the analyst wrote.

“Our Buy rating is based on strong earnings turnaround/growth in FY21-22,” Woo stated. He also expects the company to use its free cash flows for active shareholder returns via buybacks.

MU Price Action: Shares of Micron Technology had declined by 0.68% to $72.60 at the time of publication Wednesday morning.

(Photo: Micron)