Micron upgrade details -- to Strong Buy at Needham; tgt $76 (39.40)
Needham upgrades MU to Strong Buy from Buy and sets target price at $76. Last night, Micron released new, increased guidance for F2Q18 by 4% or $270MM. The company also announced that David Zinsner would succeed Ernie Maddock, who is retiring, as CFO. Given this positive pre-announcement, firm remains favorable on the memory cycle and believe Micron has room to expand NAND gross margins despite a declining pricing envm't. Furthermore, they believe whatever excess NAND supply in the market will be absorbed by demand for client and data center SSDs. Now that they have seen evidence of two consecutive quarters indicating $10+ annualized earnings, firm is upgrading. They believe the market is incorrectly applying a trough multiple on peak earnings. Over time, in firm's view, this disconnect will close and we should see a re-rating in the multiple.