How Intel's Unexpected Move Could Decimate Micron Investors' Profits
Micron Technology, Inc. (NASDAQ: MU) shares have declined 51.72 percent year-to-date, hitting a low of $14.06 on September 28.
Simon Dong-je Woo of Bank of America Merrill Lynch has downgraded the company from Neutral to Underperform, while lowering the price target from $17.00 to $12.50.
Woo believes that the unexpected change in Intel Corporation (NASDAQ: INTC)'s capex plan could adversely impact Micron Technology’s NAND business.
Analyst Simon Dong-je Woo reported that Intel now intends to spend $5.5 billion to “convert the existing CPU fab into NAND in Dalian, China.” This would account for 5-7 percent of the global NAND supply, once it is completed in the next few years.
Related Link: Was Intel's Bar Too High?
Woo expressed concern, given that the NAND industry is already facing a glut, with sharp declines in the 2H ASPs.
“We also worry about Intel’s new move given the China fab (Intel) may pose a conflict with Micron’s NAND business which is based on a JV fab US (with Intel) and in-house chip production,” Woo stated.
On the other hand, SanDisk Corporation (NASDAQ: SNDK) might raise its capex spend, following any M&A, “at a potential bidder’s request, to catch up with Samsung,” the Bank of America report said.
Woo believes that Samsung’s recently expanded 3D NAND fab could be a risk for Micron Technology, since the latter’s DRAM business would be affected in the event of a NAND downturn, given that NAND capacity could be used for DRAM.
Latest Ratings for MU
Oct 2015 | Bank of America | Downgrades | Neutral | Underperform |
Oct 2015 | Credit Suisse | Maintains | Outperform | |
Oct 2015 | Morgan Stanley | Maintains | Equal-weight |
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