Loop starts coverage on Micron, says signs of memory industry 'bottoming'
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Investment firm Loop Capital started coverage on memory chip maker Micron Technology (NASDAQ:MU) on Friday, noting there are signs of the memory industry "bottoming" as soon as the first-half of next year.
Analyst Charles Park started coverage on Micron (MU) with a buy rating and $70 price target, pointing out that the memory industry is cyclical, having peaked in the third-quarter of 2021 and been in a "prolonged" downturn since then. 
"We expect DRAM fundamentals to bottom in [first-half of 2023], with the share price typically bottoming a couple of quarters ahead," Park wrote in a note to clients. He added that although near-term macro and demand uncertainties still exist and could pressure the industry further, key metrics suggest a bottom is getting closer and the risk-reward "appears favorable."
Key metrics include "steep and prolonged" declines in memory prices, with dynamic random access memory, or DRAM, spot prices having peaked in April 2021 and declined 45% since then. In previous down cycles, the average peak-to-trough decline is approximately 65%. 
A "sharp reduction" in earnings estimates has already happened, as consensus earnings estimates for fiscal 2023 have been reduced by 85%, going from $13 per share to $2 per share currently. 
Other metrics include a "trough valuation" and "significant" cuts to spending, with Micron (MU) saying recently it would âcut 2023 total capital expenditures by 30% year-over-year and wafer fab equipment spending by up to 50%. Other memory chip makers have also announced drastic cuts.
Earlier this month, Morgan Stanley remained underweight on Micron (MU) and in-line on the U.S. semiconductor industry as a whole, noting Asian companies may emerge from the downturn "more rapidly" than domestic ones.