A Baird analyst slashed his price target on US chipmaker Micron Technology Inc (NASDAQ:MU) to US$75 from US$100 and reduced his full-year earnings estimate for the shares as gross margin near a peak.
Micron, which is based in Boise, Idaho, is the second-largest supplier of memory chips globally, offering chips that include DRAM, NAND flash and NOR flash.
Senior analyst Tristan Gerra is growing somewhat bearish on the stock as DRAM pricing is set to hit a peak in the third quarter while the oversupply of NAND flash has worsened recently.
Gerra does not expect NAND flash pricing to stabilize until the second half of next year and is concerned about the softening of demand for smartphones. He’s also now factoring in a “moderate” decline in the price of DRAM chips for next year.
“Retaining Outperform rating on valuation but removing Micron as top semi large-cap idea as gross margin is near a peak,” wrote Gerra in a note to investors. “Reducing our F2019 estimates and price target.”
Read: Baird forecasts 10% sequential dip in NAND chip prices in 3Q, but keeps Outperform rating on Micron Technology
Baird now expects fiscal earnings per share for 2019 to come in at US$11, down from its previous estimate of US$12.50.
Micron's memory chips are now used in cars, drones, cameras, smartphones and data-centers which need to support new cloud-based technologies.
Micron shares slipped by 1.6% to US$48.73 in Thursday’s pre-market session.