Micron technology challenges remain, but the risk/reward ratio is attractive

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© Reuters Micron Technology (MU) Challenges remain, but the risk-reward ratio is attractive – Deutsche Bank

By Sam Boughedda

A Deutsche Bank analyst maintained a buy rating and price target of $68 on Micron Technology (NASDAQ:) on Monday, saying risk to fundamentals remains, but the risk-reward ratio is attractive.

The analyst said the challenging environment remains for the semiconductor manufacturing company, but limiting supply growth should help.

“MU has already lowered its F4Q (August) forecast and we do not expect much deviation from the revised outlook, although we recognize that the demand environment has deteriorated. We expect F1Q (November) to remain challenging for MU as inventory adjustments in the supply chain continue, which now appears to have spread to enterprise OEMs and cloud customers,” the analyst wrote.

The Deutsche Bank analyst told investors that the company’s latest audits suggest that ASP erosion remains severe, while demand for Bits has also slowed as customers become more cautious about ASPs. macro environment.

“While the imbalance between supply and demand will likely lead to a sharp increase in inventory days at MU in the near term, we are encouraged that the company is reducing capital expenditures (which we estimate to be in down about 30% YoY to $8B in FY23), and it looks like usage will be reduced in the near term as well, which could impact production as early as 1Q CY23 “, explained the analyst. “While we believe the risks to near-term estimates are obvious, we do however believe that shares trading at ~1.1x book value of NTM are close to a cyclical low, and we consider the report current risk-reward is attractive.”

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