Shares of Micron Technology Inc rose nearly 2% in trading Monday after analysts suggested that recent production disruptions from the earthquake could help price the memory industry.
In the wake of the 6.5-magnitude earthquake that hit Taiwan over the weekend, Micron MU + 1.85% confirmed to MarketWatch that its workers are safe but the earthquake affected production at the company’s facilities in Taoyuan. “Micron is evaluating the impact and identifying appropriate steps to return to full production,” the company said in a statement.
As with previous impacts on the memory industry, analysts expect that the disruption may temporarily limit production at the factory, thus reducing industrial supply and boosting prices due to the new supply and demand balance.
“Any meaningful throughput hit would certainly result in a tighter supply environment and could pull a turn in DRAM pricing sooner than the current consensus forecast at 1HCY22,” Evercore ISI analyst CJ Muse wrote.
Micron’s shares have fallen more than 9% over the past three months amid concerns about a weak price environment for DRAM, or dynamic random access memory. Moses estimates that Fab Taoyuan accounts for about a third of DRAM capacity in microns and writes that “the possibility of a price drop sooner than expected certainly makes for a very exciting risk/return.”
It rated Micron stock as an outperformer with a $100 price target.
Meanwhile, the PHLX Semiconductor Index SOX +0.66% is up 3.8% over the past three months and the S&P 500 SPX Index, +0.47%, is up 3.5%.
Read: Why Micron Can Still ‘Shine’ Despite Its Dim Earnings Prospects
Wells Fargo’s Aaron Rakers writes that “the fab typically goes through a shutdown process when earthquakes occur, which disrupts production and requires a certain amount of time to restart.” He wrote that this dynamic typically leads to a “rapid price increase,” although he also noted that the 2020 earthquake in Taiwan “resulted in minimal production losses.”
He has a plus rating and a $115 price target on Micron’s stock.
Unrelated to the earthquake news, Bernstein analyst Mark Lee took a negative view of memory stocks when he started covering Samsung Electronics Co. He does not believe that the current “regression cycle” will end until late next year.
“Discipline in supply should make it shallower and shorter than before, but lower price is inevitable,” he wrote.
Lee set a target price of $58 on Micron’s stock, which matches the lowest target listed on the FactSet.
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