Brean Capital Bullish On Micron Technology Despite Disappointing Quarter

Brean Capital reaffirmed its Buy rating and $14 price target on Micron Technology, Inc. (NASDAQ: MU) despite the company reporting a disappointing quarterly results.

"[W]e believe that as MU's cost cutting internal priorities are still on track and that top-down picture is improving, albeit at a slower rate, hence we are maintaining our Buy rating on shares of MU and $14 TP," analyst Mike Burton wrote in a note.

Quarterly revenues slightly missed expectations and non-GAAP EPS only beat the Street by $0.01. In terms of guidance, the company took a conservative view and guided August revenue and EPS that missed Street expectations on declining Q/Q gross margins, which is disappointing given a turn in margins is part of the Micron's bullish thesis.

Related Link: Morgan Stanley: "Stay The Course" On Micron, Weak Guidance For Historical Issues

"From a top-down point of view, we still believe industry fundamentals are indeed improving, but not accelerating, given recent capex cuts from the DRAM industry leaders," Burton said.

"From a bottoms-up perspective, we believe MU has and is still executing on its current cost initiatives as it is transitioning to 20nm memory (cross over point to 20nm was this quarter) on the DRAM side and also working to deliver 3D NAND (cross over point will be this fall)," Burton added.

Although it is hard to determine when cost cutting initiatives "kick in," the analyst believes the company is on track to achieve its goals. However, analyst warned margin improvement and overall profitability will be slower than expected.

The analyst now expects a loss of $0.03 for the full year versus a profit of $0.16. The analyst also slashed his revenue forecast to $12.20 billion from $12.41 billion.

For 2017, Burton cut his EPS estimate to $0.51 from $0.99, while trimming revenue view to $13.43 billion from $13.92 billion.

At time of writing, shares of Micron Technology had fallen 9.27 percent on the day to $12.48.