MU Poised to Confront DRAM Price Cuts

Analysts at Auriga USA reiterate their “buy” rating on Micron (NYSE: MU), while raising their estimates for the company. The target price for MU is set to $10.

According to Auriga USA, the demand for and supply of DRAM are likely to remain balanced well into next year. Although demand growth may be lower that the historical levels of 50%-60%, supply is likely to be restricted as well. MU enjoys a cost leadership in the industry and has limited capex requirements. Thus, Micron has the potential to achieve free cash flows of about $1.50 per share in each of the upcoming two fiscal years, the analysts say.

MU’s cost leadership provides some buffer and the company should be comfortable even if Samsung reduces DRAM/NAND prices.

Auriga USA has raised its GAAP EPS estimates for F1Q10, F10 and F11 from $0.08 to $0.14, from $0.36 to $0.54 and from $0.55 to $0.67, respectively.