In a report published Tuesday, Deutsche Bank analyst Sidney Ho previewed Micron Technology, Inc. (NASDAQ: MU)'s second quarter print that will be released Wednesday after market close.
Ho projected Micron will earn $0.74 per share in the second quarter on revenue of $4.20 billion. However, the analyst noted that he sees downside risks to his estimates due to weak DRAM pricing in the back half of the quarter.
Ho said that a DRAM shipment decline is driven by the normalization to a 13-week quarter in F2Q and capacity taken offline for tech migration and weakness in PC shipments. As such, the analyst modeled DRAM revenues down 10 percent quarter-over-quarter with shipments down 8 percent and average selling prices lower by 2 percent.
In NAND, Ho stated that revenues are expected to be down 4 percent quarter-over-quarter with shipments and average selling prices each lower by 2 percent. Further, NAND gross margin is expected to decline by five points to around 20 percent while the company's overall gross margin is expected to dip 270 basis points quarter-over-quarter to 33.1 percent.
Despite near-term weakness in DRAM, Ho noted that supply-demand to improve in the second half of the year driven by seasonal PC build, higher mobile content, DDR4 upgrade cycle and 16nm NAND TLC ramp. Moving forward to 2016, Ho sees several positive catalysts including mobile/server demand, 20nm DRAM transition, Inotera's margin-sharing arrangement and tech improvements in NAND, driving earnings per share power of $4.00 to $5.00.
"With the stock trading at ~6.5x the low end of this range, we believe near-term downside to estimates is mostly priced in," Ho concluded.
Shares of Micron remain Buy rated with an unchanged $40 price target.
Latest Ratings for MU
| Mar 2015 | MKM Partners | Initiates Coverage on | Neutral | |
| Mar 2015 | Jefferies | Maintains | Buy | |
| Mar 2015 | RBC Capital | Maintains | Outperform |
View More Analyst Ratings for MU
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