BofA Upgrades Micron Technology On Rising Datacenter Chip Demand

Although there is overall macro risk due to a coronavirus-led slowdown in global economic growth, Micron Technology, Inc. MU faces new growth opportunities with rising demand for datacenter chips as more companies transition to the remote workplace model, according to BofA Securities.

The Micron Analyst

Simon Woo upgraded Micron Technology from Underperform to Buy and raised the price target from $50 to $60.

The Micron Thesis

Micron Technology reported better-than-expected results for the fiscal second quarter and gave positive guidance for the next quarter. The guidance reflects gross margin expansion, Woo said in the Thursday upgrade note. (See his track record here.)

The company’s fab operation and new tech migration appear on track, the analyst said.

“Our analysis also shows stable or decently increasing blended ASP and margin improvement.” 

The pandemic has led to an increase in new chip demand for datacenters, while average selling prices have improved, led by server dynamic random-access memory, which “should have positive implications” for supply chain companies, Woo said.

 Micron Technology has solid financials and capital returns, and its post-COVID-19 earnings turnaround could be much stronger than anticipated if the lost 5G phone demand in the first half of the year occurs in the fourth quarter of 2020, the analyst said.

Micron Price Action

Micron shares were trading 3.04% higher at $43.79 at the time of publication Thursday.

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