Citi: Micron Cons Outweigh The Pros At This Point

There are plenty of pros and cons to buying Micron Technology, Inc. MU shares down 17.8% from where they were a year ago. Unfortunately for Micron investors, one analyst said Monday the cons still outway the pros at this point.

The Analyst

Citi analyst Christopher Danely reiterated his Sell rating and $30 price target for Micron.

The Thesis

Danely said the downturn in DRAM prices that has weighed on the stock over the past year will likely drag on into the first half of 2020.

After meeting with Micron shareholders, Danely summarized the pros and cons of buying the stock. Micron bulls will likely focus on these three pros:

1. Since 2001, margins have trended higher, making a series of higher highs and higher lows throughout pricing cycles.
2. Micron is no longer unprofitable during cyclical downturns.
3. Focus in the DRAM market has shifted from market share to profits, insulating Micron from pricing wars.

Daney also listed the following three cons:

1. Micron is only four quarters into a DRAM market downturn, which have historically lasted six to eight quarters.
2. The DRAM market is still oversupplied, and prices will continue to decline into the first two quarters of 2020.
3. Micron’s 153 days of inventory is an all-time high.

At this point in the DRAM market cycle, Danley said risk is still to the downside for Micron, but traders should take a look at the stock on a sizeable pullback.

“We remain cautious but would buy MU stock close to low $30’s/1X book, which has happened twice in nine months,” Danely said.

Price Action

Micron shares traded higher by 1.47% on Monday, closing at $42.13.

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