“We like Micron's IM Flash Technologies transaction announcement, which gives Micron full control over its next-gen memory investments and capacity, makes it the sole producer of advanced memory technologies on US soil, paves the way for potential ReRAM and FeRAM investments, and provides a $6B fab for an estimated $4-$4.25B cumulative investment,” wrote Baird analysts Tristan Gerra and Maggie Sims in a note to clients.
“The $1.5 billion payment, in addition to an estimated $2.5-$2.75 billion investment to date, gives Micron full ownership of a $ 6 billion fab. This continues to define Micron's strategy as a memory industry consolidator,” they added.
The analysts said that full ownership of IM Flash Technologies paves the way for Micron to invest in future, “disruptive memory technologies” including ReRAM and FeRAM.
READ: Micron Technology's valuation still looks attractive for longer-term investors, says Baird analyst
Baird has an Outperform rating on Micron stock and a $75 price target for the US chipmaker, even though its gross margin and earnings per share both peaked in its last quarter. Baird’s Gerra forecasts that Micron’s gross margin will not stabilize until the second half of fiscal 2019 and won’t rebound until fiscal 2020.
Based in Boise, Idaho, Micron is the second-largest supplier of memory chips globally, offering chips that include DRAM, NAND flash and NOR flash.
Micron’s memory chips are used to store information, in comparison with microprocessor chips made by companies like Intel, which provide computing power.
Micron shares traded 1.7% lower to hit $40.58 midday Friday on a broad market pullback.
Contact Uttara Choudhury at [email protected]