10-11-13 11:24 AM EDT | Email Article

By Benjamin Pimentel, MarketWatch


SAN FRANCISCO (MarketWatch) -- Shares of Micron Technology fell Friday a day after the chipmaker swung to a profit aided by one-time gains of Elpida Memory, as analysts blamed the selloff to a combination of profit-taking and investor questions on the longer-term impact of the acquisition on Micron's financials.


Micron (MU) shares dropped more than 5% to $17.51, even as many analysts offered an upbeat view of the semiconductor company's prospects in the wake of a fire that forced rival Hynix to suspend operations and the benefits of its Elpida acquisition.


Late Thursday, Evercore Partners analyst Patrick Wang told MarketWatch, "There's clearly some profit taking given the acceleration over the past few months." Micron shares have soared more than 175% year-to-date and are up more than 35% in the last three months.


Bernstein analyst Mark Newman also said Friday morning that the Micron sell-off was likely due to "mostly profit taking."


"This could be a great opportunity to buy if you missed it before," Newman told MarketWatch. But he also speculated that the stock is down "investors' confusion around the numbers."


Newman raised his price target to $24 from $20 telling clients in a note, "Industry read-through continues to be very good as Micron's DRAM and NAND gross margins continue to rise and supply growth remains in check."


But Newman also said "the lack of clarity" on the impact of Elpida on Micron's earnings and cash flow potential "may give some investors concern."


Micron reported a fiscal fourth-quarter profit of $1.71 billion, or $1.51 a share, compared with a loss of $243 million, or 24 cents a share, for the year-earlier period. Revenue rose to $2.84 billion from $1.96 billion. The company's results included a gain of $1.31 a share related to the acquisition of Elpida Memory, Micron said.


Analysts polled by FactSet on average expected Micron to report a profit of 24 cents a share, on revenue of $2.7 billion


In its report, Micron said it got a lift from higher prices for DRAM processors used for personal computers and servers, while noting a decline in prices for NAND chips used widely in smartphones and other devices.


A fire last month forced rival Hynix to suspend operations at a factory in China, a development that's also expected to affect supply and benefit Micron.


Topeka Capital's Suji De Silva also told clients, "We are raising our price target from $13.50 to $18.00 which we believe is deserved given the improved profitability forecast and favorable pricing tailwind."


Wedbush analyst Betsy Van Hees told clients in a note that while Micron's fiscal fourth-quarter revenue "soared past expectations, GAAP earnings excluding the one-time gain from Elpida fell short, as much of the Street didn't account for the impact from purchase accounting."


But echoing Newman's analysis, she also wrote, "We believe with our long-term investment thesis is firmly intact and continuing to play out: investors should take advantage of any weakness in the stock today and buy shares."


Jefferies analyst Sundeep Bajikar also upped the broker's price target to $30 from $25, citing the expected profit contribution of Elpida in the coming quarters.

-Benjamin Pimentel; 415-439-6400; AskNewswires@dowjones.com


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10-11-13 1124ET

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