NEW YORK (TheStreet) -- Shares of Micron Technology (MU) - Get Report were falling 5.6% to $14.08 on Monday following several negative notes from analysts ahead of the chipmaker's fiscal fourth quarter earnings report, which is due after the market closes on Thursday.
Wedbush Securities lowered its price target for Micron to $17 from $19, maintaining its "neutral" rating for the company in a note to investors. Wedbush analyst Betsy Van Hees said she believes the DRAM oversupply is bottoming out, but that it isn't there yet.
"We are concerned that the near-term spot PC DRAM pricing stabilization could be short lived as the uplift from typical holiday seasonality in CQ4 is looking to be muted due to weak PC and mobile demand affected by macro uncertainty," Van Hees wrote. "We look for MU's FQ4 results to miss and a guide down for FQ1."
Nomura also expects Micron to forecast results below the consensus for November, according to Barron's. The analyst firm agrees that we haven't reached the bottom of the DRAM oversupply.
"While DRAM pricing started improving in early September, pricing has since rolled over in both DRAM (excess PC and smartphone inventories) and NAND (aggressive pricing, greater TLC production)," Nomura analyst Romit Shah wrote. "In addition, cost reductions have been slowing as a result of migrations (20nm) and a mix shift to DDR4. We expect Micron's cost per bit to decline 3% in the November period, less than the ASP decline of 6%."
Analyst firm Cowen also expects November to be the bottom of the DRAM oversupply, saying investors could use weakness in the stock to add positions in the company.
"We estimate MU's blended DRAM ASPs likely down ~12% Q/Q or below low-end of 'down mid-to-high singles' guide, and we estimate blended NAND ASPs fell low singles that is also slightly below guidance of 'flat,'" analyst Tim Arcuri wrote "We think ASPs have come under pressure as PCs remained very soft for much of Aug-qtr that led to industry peers shifting significant DRAM capacity to server and mobile markets, which now risk being oversupplied despite stronger demand trends."
Separately, TheStreet Ratings team rates MICRON TECHNOLOGY INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate MICRON TECHNOLOGY INC (MU) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.60, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, MU has a quick ratio of 1.62, which demonstrates the ability of the company to cover short-term liquidity needs.
- MICRON TECHNOLOGY INC's earnings per share declined by 38.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MICRON TECHNOLOGY INC increased its bottom line by earning $2.55 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($2.67 versus $2.55).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 52.39%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 38.23% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 39.1% when compared to the same quarter one year ago, falling from $806.00 million to $491.00 million.
- You can view the full analysis from the report here: MU