Of the 35 analysts covering Micron Technology (MU), 20 have rated the stock a “buy” while 14 rated the stock a “hold.” Only one analyst has a “sell” rating on the stock. Analysts have a price target of $48.77 for the stock and a median consensus estimate of $47.50. Micron is now trading at a ~33.9% discount to its consensus median target estimate. Micron stock closed down 7.9% on December 19 at $31.41.
Micron’s weak Q1 results
Chipmaker Micron reported mixed results in Q1 of fiscal 2019 (which ended on November 29) on December 18. The company beat Wall Street’s expectations for earnings but missed revenues. The computer memory chips maker also shared a weaker-than-expected forecast for revenues due to the declining demand for its products. The company expects revenue for the coming quarter in the range of $5.7 billion–$6.3 billion, compared to analysts’ average of $6.6 billion. Global worries relating to the US–China trade war are also weighing on the stock.
While RBC slashed its rating from “outperform” to “sector perform” after the soft Q1 results and weak guidance, RBC, Morgan Stanley (MS), UBS, J.P. Morgan (JPM), BMO, Barclays, and Needham have reduced their price targets.
Micron’s balance sheet position
A decline in memory chip prices directly affects Micron’s earnings. So Micron is focusing on improving its operating leverage to mitigate the impact of declining prices.
The company has significantly improved its balance sheet. It reduced its long-term debt from $3.777 billion at the end of August to $3.734 billion at the end of November. Its operating cash flows increased 32.3% year-over-year to $4.8 billion in the first quarter of fiscal 2019.
Micron’s CEO is also confident about the secular demand, and has, therefore, announced the company’s first $10 billion stock buyback program in fiscal 2018. In the first quarter of fiscal 2019, Micron repurchased $1.8 billion under its stock repurchase authorization. The company anticipated spending $1.5 billion on buybacks during the fourth quarter of fiscal 2018.