Micron slips as Morgan Stanley remains underweight, in-line on US semiconductors
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Micron Technology (NASDAQ:MU) shares slipped on Wednesday as investment firm Morgan Stanley remained underweight on the memory chip maker and in-line on the U.S. semiconductor industry as a whole, noting that Asian companies are likely to emerge from the downturn "more rapidly" than domestic ones.
Analyst Joseph Moore noted that Micron (MU), which competes with Samsung (OTCPK:SSNLF) and SK Hynix in the memory space, is trading at 1.2 times book value, whereas SK Hynix is trading below book. 
Moore noted that investors have grown increasingly bullish on Micron (MU) at these levels due to three reasons: downside protection from book value; a sense that the magnitude of the November quarter deceleration would indicate a material snapback down the road, and the company's view that bit growth will materially reaccelerate in May. 
"We would respond to the book value point that while book value is up 48% since the stock bottomed in the 2019 downturn, a function of the very high portion of operating cash flow being invested into capital, peak earnings were below the 2018 peak, trough earnings are (at least on a quarterly basis) already well below the 2019 trough," Moore wrote.
Micron (MU) shares slipped nearly 1% to $53.53 in premarket trading.
Moore added that trailing 3-year free cash flow is a "fraction" of what it was in 2019, inventory levels are likely to be "materially higher" than in 2019 and the economic outlook is more cautious, adding that book value is not likely to be a "hard floor."
Morgan Stanley's Asia team has listed SK Hynix as a top pick.
"Longer term, Micron has a healthy balance sheet, continues to execute well in terms of product roadmaps and like-for-like price declines, and we generally don't disagree with views that the company is in a strong position longer term; our cautious view is driven by challenges that we foresee in the next 12 months vs. optimistic consensus," Moore explained.
Regarding other U.S.-based semiconductor companies, Morgan Stanley has an in-line rating on the sector, as "obvious cyclical challenges" look to be "partly priced in."
The firm is overweight both Lam Research (NASDAQ:LRCX) and Western Digital (NASDAQ:WDC), even though both companies are likely to have a "challenging fundamental outlook," especially for Western Digital.
However, the firm added that current valuations are discounting this outlook and in the case of Western Digital (WDC), the stock has "zero valuation" from its memory business, compared to a roughly $15B replacement value.
For Lam Research (LRCX), it's likely that wafer fab equipment spending goes below $80B, but it's expected that 2023 will be the "trough" in memory spending and the company still has "very healthy cash flow metrics even as fundamentals come under pressure."
On Tuesday, Micron Technology (MU) said it would spend up to $100B over 20 years on a massive new chipmaking facility in upstate New York.