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Who would dare recommend selling shares of Micron Technology (MU), even as its earnings reports continue to blow away Street expectations?

UBS’s Timothy Arcuri today does just that, reiterating his Sell rating and $42 price target, writing that despite “solid execution,” there continues to be risk of a “big correction” for the memory chip market next year.

The stock today is up $1.53, or 2.6%, to $60.48, continuing last night’s gains, after the company beat fiscal Q3 revenue and profit expectations and also forecast this quarter higher. As mentioned earlier, price targets are soaring as high as $120 today.

"But 2019 has always been the issue,” Arcuri writes, "and on this front, there was not anything on the call per se to swing the bear or bull case though we do acknowledge that recent Samsung pushouts reduce supply for 2019."

The problem is profit margin next year, he argues.

"The trajectory of GMs into F2019 remains the biggest tactical question as this remains the first order correlation for the stock; we ultimately see a rolling peak for another few Qs, but a potentially big correction in 2019," writes Arcuri.

In particular, the company is indicating that its NAND flash chips will see "significant bit growth and cost downs in in the second half of this year,” which is "a positive for near term gross margin,” but in DRAM, “while MU is benefiting from 1x, we still think cost downs could decelerate into F19 as 1Y challenges emerge."

Arcuri’s price target is a 3.5 multiple of projected earnings before interest, taxes, depreciation, and amortization, which he thinks is appropriate given that "questions on supply/demand balance into F19 and beyond remain open."

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