Are Micron Technology (MU +10.95%) shares about to rise by nearly 20%? Analyst Sidney Ho of Deutsche Bank thinks so; he upgraded his recommendation on the stock from neutral to buy, with a $60 per share price target (the company's most recent closing level was $50.68).
Ho believes that while the market for the DRAM, or dynamic random access memory, chips that the company specializes in will hit a low in the fourth quarter of this year, a rebound is in store. In his view, recent data indicate that demand for such products has risen in both the mobile and PC server segments. This should result in price increases in Q1 of next year.
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Micron's business has suffered lately because of two factors. The first is the coronavirus pandemic. As with other businesses throughout the global economy, the company has been badly affected by softening demand from clients looking to cut costs.
The second is the loss of a major customer for the company, Huawei. American companies have been prohibited from selling chips to the Chinese tech giant. This has hit Micron particularly hard, as roughly 10% of the revenue in its latest reported quarter came from the Asian company.
As a result, Micron proffered very cautious guidance for the Q1 Ho is optimistic about. The company forecast its non-GAAP (adjusted) per-share earnings will land at $0.40 to $0.54 for the quarter -- very short of the average $0.66 estimated by analysts.
On Monday, Micron shares essentially moved in concert with the broader stock market, rising by just under 1.6%.
