By Senad Karaahmetovic
Micron (NASDAQ:MU) shares are down over 4% in pre-market Monday after Summit Insights Group's Kinngai Chan downgraded the stock to Hold.
The analyst “no longer expects the memory market dynamics to turn favorable in 2H22,” hence the downgrade to Hold.
Industry checks showed “continued sluggishness in the smartphone” market, in addition to the continued decline in the PC client demand.
“We are now seeing a slower than expected industry adoption of DDR5 which we believe will result in more pricing pressure for DRAM in the near to medium term. Our recent industry checks also indicate elevated memory inventories at Asian brokers, module houses and ODMs,” Chan told clients in a note.
Moreover, the analyst expects MU to experience gross margin headwinds in the second half of the year.
On the other hand, UBS analyst Timothy Arcuri reiterated a Buy rating and cut the price target to $115.00 per share from $120.00. The analyst believes the risk/reward is skewed “meaningfully to the upside from these levels.” As such, Micron stays the Top Pick in the sector.
“We believe investors continue to overlook several key factors. First, although end market weakness in PC/smartphones is weighing somewhat on near term DRAM ASPs, we see very strong pricing support heading into C2023 as the industry growth in bit supply is set to compress significantly,” Arcuri wrote.