Micron stock sinks as Morgan Stanley warns on memory chip sector

Key recommendations

• Morgan Stanley cut its price target on Micron Technology and warned about the future of the memory chip sector.

• The bank said it sees “cooler conditions from here” for the equity group.

• Analysts expect the sector’s growth to peak and reverse in the coming quarters.

Micron Technology (MU) was one of the biggest decliners in the S&P 500 this month after Morgan Stanley cut its price target to $100 from $140 and gave the memory chip sector a downgrade.

The bank warned that while it is difficult to predict cyclical peaks, “both NAND and DRAM are losing momentum and our inflection indicators suggest cooler conditions from here.”

Analysts wrote in a report to clients that while demand for memory chips is still growing, “the rate of change is approaching a peak as supply catches up with demand.”

Morgan Stanley sees reversal in sector earnings growth

They added that they see earnings growth in the sector peaking and then reversing in the coming quarters, with a near 30% contraction in the price-to-book (P/B) ratio, “and a greater chance for investors to reset their positions “.

Analysts argued that even if valuations look good as share prices fall, it doesn’t make sense to buy dips as they anticipate “better entry points going forward.”

Shares of Micron Technology fell 4.5 percent Monday afternoon to $87.10. They increased by about 2% in 2024.

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