An earlier version of this report misstated the name of Citi analyst Christopher Danely. It has been corrected.
Bloomberg News
Micron Technology Inc. seems poised to report a “fugly” quarter on Tuesday and may lose money by the end of the year, according to Citi, but its stock could be nearing a bottom.
Citi Research analyst Christopher Danely reiterated his sell rating on Micron shares MU, +0.54% in a Monday note to clients, though he conceded that the worst times for Micron’s stock might soon be in the past, even if the company might have to undergo several more quarters of pain.
“We expect the company to miss consensus estimates and guide below consensus due to the DRAM crash,” Danely wrote of the company’s upcoming earnings report on Tuesday afternoon. “We also believe that there is a good chance that Micron will lose money before the end of the year given how bad the DRAM environment is.”
Recent DRAM downturns have lasted six to eight quarters, he wrote, but the current down cycle is only three quarters old.
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There is a potential silver lining, however, according to Danely: “On the bright side, we believe that the stock is close to a bottom, so long-term investors could nibble away at it.” Though Danely isn’t changing his rating and expects that DRAM conditions won’t stabilize until next year, he argued that Micron could eventually get back to its peak earnings per share of $11.74, even if the process takes years.
The stock is up 0.5% in midday trading Monday.
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Danely has a $30 price target on the shares, which are up nearly 7% so far this year but off 41% on a 12-month basis. The PHLX Semiconductor Index SOX, +0.47% is up 3.3% over the past 12 months, while the S&P 500 SPX, +0.00% has gained 7.2%.
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