Micron Loses Steam As NAND Prices Show Signs Of Peaking

Micron Loses Steam As NAND Prices Show Signs Of Peaking
September 7, 2018


The stock of the semiconductor chip manufacturer Micron Technology, Inc. (Nasdaq: MU) fell 9.87% to $44.65 yesterday after the company’s CFO David Zinsner revealed that the price of the NAND memory chip decreased in 3Q18. The CFO’s statement was echoed by at least two investment research firms. Notably, the Boise, Idaho-based Micron is the world’s second-largest supplier of DRAM, NAND flash and NOR flash.


Memory chip market is still growing at an impressive rate

Zinsner’s statement was not entirely disappointing, for even though NAND prices declined in the third quarter, the CFO stated that the firm realized an increase in the average selling prices on a sequential basis in the third quarter, mainly due to products that use both NAND and DRAM chips. Zinsner stated the following: “ASPs are actually higher in that space.”

Micron also expects NAND chips to record a growth rate of 40%. Unlike Intel’s chips, which provide computing power, Micron’s memory chips are used for storing data. However, analysts believe that the unexpected, persistent rise in demand over the past two years has already started subsiding.

Tristan Gerra, an analyst at Baird, has stated that pricing for DRAM chips could peak in 3Q18 as the oversupply of NAND chips is taking a turn for the worse.

Gerra also anticipates a moderate decline in the price of DRAM chips for 2019 and said: “DRAM pricing is likely peaking in C3Q, while NAND oversupply has worsened recently.”

The analyst firm, Baird, no longer calls Micron a “top idea,” and the firm has downwardly revised its price target to $75 per share, from $100 per issue earlier, however, the forecast price is still 40% higher than yesterday’s closing price. The analyst continues to give an “Outperform” rating for the stock but emphasizes that a bull market cycle for both DRAM and NAND is currently at its peak.

Similar to Baird, Morgan Stanley has also stated that there are indications of a decline in the price of DRAM and NAND.

Shawn Kim, analyst Morgan Stanley, stated: “We recently met buyers and sellers of memory and believe that the 4Q outlook for server DRAM is worse than we previously expected along with the prospects for the rest of memory in 3Q.”

Sidney Ho, an analyst at Deutsche Bank, also echoed the opinion of Gerra and Kim but argues that the projected downturn is already priced into the stock. As a result, Deutsche Bank maintains its “Buy” rating for the stock, with a price target of $80. If the oversupply deepens further, then the stock could get hit.

Technically, the stock has broken its 50-day moving average. Furthermore, the Chaikin money flow indicator is in the negative region. Therefore, we are expecting the stock to turn bearish in the short-term.

Micron - technical analysis - 6th September 2018

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Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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