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Loop Capital says buy Micron Technology as the semiconductor downcycle nears a bottom

Despite a tough few quarters for the memory industry, signs that the rout is nearing a bottom makes now an opportune time to buy shares of Micron Technology , according to Loop Capital. Analyst Charles Park initiated coverage of the semiconductor stock with a buy rating, saying in a note to clients Thursday that he expects Micron’s earnings to bottom and inventories to peak in the fiscal second quarter of 2023. “We expect DRAM fundamentals to bottom in 1H23, with the share price typically bottoming a couple of quarters ahead,” he wrote. “Although the N-T macro and demand uncertainties remain and semis will likely face further pressure, the key metrics suggest that the memory industry is nearing a bottom and that the risk/reward appears favorable.” Park said that the best time to load up on shares is when the industry outlook looks most bleak and memory makers cut capex aggressively. Other signs of a nearing bottom include the roughly 85% drop in earnings estimates for the company. Despite slumping about 41% this year as the semiconductor industry and growth stocks come under pressure, shares are due for a rebound and offer an attractive risk/reward at these levels, Park said. The firm’s fresh price target implies a nearly 28% potential return from Thursday’s close price. “While bit shipments remain weak, price declines so far have been relatively resilient compared to the past downcycles,” Park wrote. “Long-term outlook for the memory industry remains positive, as memory has become strategically more important within semis.” — CNBC’s Michael Bloom contributed reporting

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