Micron stock fell ~2.3%
Micron (MU) shares fell ~2.3% on April 4 to $42.89 after an analyst downgraded the stock. Morgan Stanley slashed Micron’s rating to “underweight” from “equal-weight” citing margin concerns due to inventory pressure. The investment bank has given Micron a target price of $32, which is 25.4% below the closing price on April 4.
Micron stock has been riding high since the company reported upbeat second-quarter results. Micron predicted that memory chip demand will rebound in the fourth quarter. Micron stock has risen 35.2% year-to-date as of April 4. NVIDIA (NVDA), Marvell (MRVL), Intel (INTC), Advanced Micro Devices (AMD), and Western Digital (WDC) rose 41.2%, 29.9%, 19.9%, 57.6%, 40.6%, respectively, on April 4.
Morgan Stanley’s concerns
According to Morgan Stanley, Micron has excessive inventory, which is expected to pressure its prices and margins. The bank stated that the inventory pile up to 150 days by midyear is a “significant negative” for Micron. The supply is already high with declining demand for memory chips. Although analysts expect the memory demand to recover in the second half of the year, Morgan Stanley doesn’t expect the demand to lower the inventory levels fully.
Since Micron’s inventory levels have already reached 25-year highs, Morgan Stanley thinks that there’s a higher possibility of the target price touching the low 30s before reaching the high 50s. The bank also expects Micron’s stock price to reach $30–$60 over the longer term.