Analysts say Micron Technology (MU) could be a good buying opportunity Friday as its shares slide on concerns over tariff troubles and weakened forward guidance. MU was down some 3.8% shortly after 2 p.m. ET at $44.33 after management lowered forward guidance during a Thursday evening earnings call.
Despite the short-term slide, experts see good opportunities with the stock on the longer horizon. "We remain overweight MU and would accumulate shares on weakness," J.P. Morgan analyst Harlan Sur wrote Friday, indicating his belief that positive future trends in semiconductors, coupled with the company's big share-buyback program, should reward longer-term investors.
While Sur joined a parade of analysts trimming their price expectations for the stock, he maintained a "Buy" rating on MU and a $75 price target. And he wasn't the only expert who sees the stock's softness as a buying opportunity even as they tempered expectations for MU's future price.
For example, Keybanc Capital Markets Weston Twigg wrote Friday that "we remain bullish on Micron's long-term upside. We believe investors should be opportunistic buyers on likely headline and model risk over the next two to three quarters."
Of course, it's been a bumpy ride for MU investors so far this year, with the stock down more than 25% over the past six months on the back of memory-pricing concerns. The downturn has caused a number of institutional investors to flee the stock this year as players assessed the impact that potentially lower NAND and DRAM prices could have on MU.
However, many experts think the stock's reduced price already bakes such worries in. "We think that much of the weaker outlook is already embedded in the stock," Shebly Seyrafi of FBN Securities wrote in a Friday note.
Seyrafi said that given the market's realization of the stock's potential downsides, Micron's current weakness presents a significant buying opportunity. "We estimate fiscal 2019 free cash flow at $7.1 billion, implying a free cash flow yield of 13% on the current market cap of $53 billion," he said. "This is extremely attractive, even with the risk that DRAM and NAND prices decline more dramatically going forward."
Micron's Big Share-Buyback Program Could Help
Meanwhile, MU plans to use free cash flow that the company has been building up to pay for a major stock-buyback program, which management said Wednesday it might even accelerate.
If the company leverages this buyback program the way Qualcomm (QCOM) and NXP Semiconductors (NXPI) have done, that could provide even more evidence of a buying opportunity here. So, Friday's slip might end up being the perfect opportunity to jump into Micron as it bottoms out before a potential longer-term rise.
