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Why Did Analysts Lower Their Price Target for Micron?

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Dec. 31 2018, Updated 10:30 a.m. ET

Analysts lowered their price target for Micron 

So far, we’ve learned that Micron Technology (MU) is seeing demand weakness in all of its end markets except long-life-cycle automotive and industrial products. The company’s management expects demand to remain weak in the PC, data center, and mobile end markets.

The company’s stock has fallen 42.3% since the start of September to a new 52-week low of $30.11, and it’s falling further as analysts lower their price targets.

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Between September and December, analysts lowered their bearish consensus price target for Micron from $45.0 to $32.0 as the company’s revenue guidance for its coming fiscal 2019 quarter fell short of analysts’ estimate by $1 billion. Analysts revised Micron’s median price target to $46.5, close to its September bearish price target of $45, in December. Such a steep dip in Micron’s price target is normal for a cyclical stock. 

The differences between Micron’s and Western Digital’s (WDC) bullish and bearish targets are $58 and $91, respectively. Micron stock has been trading below its bearish price target since September, while rival Western Digital stock is trading above its bearish price target of $35.0.

What analysts think about Micron

Analysts are pessimistic about the memory demand environment. Needham analyst Rajvindra Gill has downgraded Micron on the expectation that demand will remain weak for at least the next six months. Gill is concerned that demand could worsen, putting pressure on Micron’s profit margins.

BMO Capital Markets analyst Ambrish Srivastava disagrees with Micron CEO Sanjay Mehrotra’s comment that the current downturn is an “air pocket,” as the weakness is spread across most of the company’s end markets.

Analysts are pessimistic about the demand environment because of the US-China trade war, which has slowed overall economic demand and created uncertainty—especially in the tech industry, which has large exposure to China. We’ll look into this slowdown next.

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