Micron Technology slumps to year-to-date low - MarketWatch

By Rex Crum, MarketWatch

SAN FRANCISCO (MarketWatch) — Weaker-than-expected earnings drove down Micron Technology Inc.’s shares Friday, but many analysts who follow the memory-chip maker believe it’s too early to write the company off due to opportunities in the tablet computer market.

The shares slumped as much as 14% to a year-to-date low of $7.24, after Boise, Idaho-based Micron /quotes/zigman/75433/quotes/nls/mu MU -13.16% reported a 92% drop in third-quarter earnings late Thursday.

Micron said it earned $75 million, or 7 cents a share, on revenue of $2.14 billion for the three months ended June 2, down from a profit of $939 million, or $1.06 a share, on $2.26 billion in the same period during fiscal 2010.

Wall Street has been bullish for some time about F5 Networks Inc., which makes gear that helps companies manage the traffic load on their digital networks. But some analysts have turned cautious, saying F5's growth in some key markets may be tapering off.

Analysts surveyed by Thomson Reuters had forecast Micron would earn 16 cents a share on revenue of $2.37 billion.

Micron executives said they were seeing weakness in the PC market, which was dragging down shipments of the company’s DRAM memory chips. Prices of DRAM chips have also gone down, and Micron said it had accumulated more inventory than it traditionally holds.

Citigroup analyst Glen Yeung left his hold, or neutral, rating on Micron’s shares unchanged but cut his price target to $10.50 from $13.

Yeung said in a research note that weak demand in consumer PCs cited by Micron is consistent with checks of chip-industry sales channels. He added that the notebook PC market remains challenging, and as such, “We expect chip stocks to remain under pressure through the upcoming earnings season.”

Kevin Vassily, analyst with Pacific Crest Securities, also lowered his price target, taking it down to $14 from $16 previously. However, Vassily said that despite Micron’s disappointing quarter, he believes the company’s shares are “too cheap to ignore.”

/quotes/zigman/75433/quotes/nls/mu MU 7.32, -1.11, -13.16%
/quotes/zigman/1468249 SOX 393.96, -8.60, -2.14%
Vassily pointed to book value — the total value of a company’s assets that shareholders would theoretically receive if it were liquidated — as an example of how Micron’s stock may represent an buying opportunity for the long term. He estimates Micron’s book value at $9.82 a share.

“With the prospect of no new DRAM industry capacity coming on line, combined with Micron’s ability to capture market share in NAND [flash memory] with its cost-leading manufacturing technology, we see it as an opportune time to consider long positions,” Vassily wrote in a research note.

Vassily also has an outperform rating on Micron’s stock.

/quotes/zigman/75433/quotes/nls/mu Rex Crum is a reporter for MarketWatch in San Francisco.

Category: technology