Mizuho analyst Vijay Rakesh worries about memory demand and its impact on prices, trends he says could weigh on shares of Micron Technology Inc. and Western Digital Corp.
He downgraded both stocks to neutral from long Tuesday night, writing “steep price declines” heading into the December quarter and the start of the new calendar year.
“While we may be late for the downgrade, we believe that weak macro macro, weak consumer demand, high inventories and continued supply growth imply more downside risk” over the past few months. next four to six months, he wrote.
Micron MU stock,
fell 2.2% in premarket trading on Wednesday, and Western Digital’s WDC stock,
lost 1.8%, both heading for two-year lows.
In Rakesh’s view, Micron and Western Digital both “executed well” with their memory deals, but he said his industry checks indicated “bigger than expected” declines in DRAM memory prices. and NAND for the December and March quarters. Additionally, he sees new competitive dynamics in the industry as Yangtze Memory Technologies Corp., a Chinese company, “is rapidly gaining legitimacy now as a major supplier to Oppo/Vivo and also potentially [the] iPhone 14.”
Rakesh cut his price target on Micron shares to $56 from $75, while lowering his price target on WDC shares to $40 from $62.
Elsewhere, Wells Fargo’s Aaron Rakers took a more cautious stance ahead of Micron’s Sept. 29 earnings report, though he maintained his overweight rating.
“MU’s upcoming F4Q22 earnings pattern (9/29) looks very negative as DRAM and NAND industry fundamentals continue to weaken,” Rakers wrote in a Wednesday note to clients.
Rakers added that he was cutting his forward estimates for Micron “significantly”, but that he believed the absolute level of cuts to revenue and earnings per share estimates would be less significant than Micron’s comment on a potential bottom. and its projections for capital spending in fiscal year 2023.
The company already issued a revenue warning in early August.
Micron shares are down about 11% in the past three months through Tuesday, while Western Digital shares are down about 24%. The S&P 500 SPX,
increased by about 2% during this period.