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Shares of Micron Technology (NASDAQ:MU) are down nearly 5% today after Piper Sandler analyst Harsh Kumar lowered the rating to Underweight from Neutral with a $70.00 per share price target (from $90.00).
The analyst cited Micron’s “oversized exposure to mobile, PCs, and other consumer end-markets and the associated trends in the macroeconomy” as a key reason that fueled the downgrade move.
It is estimated that Micron has exposure to PCs, mobile, and other markets of roughly 55%. The company’s core business – the DRAM market – has also experienced price declines recently, Kumar added.
“Our concern is that these price declines could accelerate as the broader economy slows and consumer spending stalls. In addition, NAND pricing is also decelerating, with rolling three-month average contract prices for 512GB TLC SSDs declining year-over-year for the last three months. In a situation where the demand curve shifts down, Micron is likely to continue to see pressure on pricing, which could be detrimental to earnings,” Kumar told clients in a note.
Kumar also argues that the memory market is a commodity market.
“From our perspective, other larger players control market supply to a much better degree than Micron, leaving potentially excess capacity in case of a downturn.”
On a positive note, the analyst continues to have confidence in the company’s data center business.
