Micron downgraded to Sector Perform at RBC Capital on inventory, demand risks
As reported earlier, RBC Capital analyst Amit Daryanani downgraded Micron to Sector Perform from Outperform and lowered his price target to $40 from $59 after its disappointing Q2 outlook. The analyst cites the company's inventory risk, as the "ongoing" industry downturn has increased its inventories by 22% "and heading higher" in the February quarter, warning that memory also tends to be a "depreciating asset" as the industry correction gets more "severe". Daryanani is also concerned with "Demand risk" for Micron, with real possibility that the issue requires further reduction in capacity and/or lower pricing in mid-2019. Additionally, the analyst cites competitive risk given the lack of clarity about its peers' intentions to reduce capacity and an upside inflection in Micron's operating expenses, which could pressure earnings further in Q3.