Amid the ongoing earnings season, on Wednesday, Micron Technology (MU) is scheduled to announce its fiscal third-quarter results, after the market closes.
The American company produces computer memory and computer data storage, including dynamic random-access memory, flash memory, and USB flash drives. As part of the highly cyclical semiconductor industry, it has gained from elevated demand for its memory products in recent quarters. (See Micron stock chart on TipRanks)
Therefore, Rosenblatt Securities’ Hans Mosesmann anticipates revenue and adjusted earnings to be in line with management’s positive pre-announced guidance. Revenue is likely to be at or above the high-end of the guidance range, $7.3 billion, which was provided during the second-quarter earnings call. Previously, management guided revenue to be $7.10 billion +/- $200 million. Additionally, the company expects gross margin and EPS to be solid in the quarter.
The 5-star analyst said, “We see the May quarter being driven by strength across the board, including in mobile, auto, PC, and cloud, as well as strong pricing trends for both DRAM and NAND.”
There was a spike in demand for enterprise laptops and data center servers as a result of the pandemic-induced work-from-home and online-learning trend. The ensuing rising demand for chips from PC manufacturers and data-center operators might have supported the company’s revenues in the to-be-reported quarter.
Therefore, “pertaining to DRAM and NAND,” Mosesmann said, “the company saw better than expected pricing in both. In DRAM, we see industry dynamics continuing on the upswing, as demand remains strong for mobile, notebook (continued robust demand in graphics and gaming), PC (Micron gets included in new CPU architectures), and servers, as well as the continued build out of 5G, the move to Wi-Fi 6, and the continued adoption of cloud, AI, and machine-learning. Although we believe NAND will see strength in demand, supply remains volatile; however, we continue to believe demand/supply dynamics will be roughly balanced as we continue through 2021.”
Overall, Mosesmann calls for Q3 revenue of $7.35 billion, and EPS is expected to hit $1.71, 3 cents above the Street’s call.
Looking ahead to the August quarter, the analyst expects Micron will guide revenue up mid-single-digits sequentially and announce an adjusted EPS of $2.15.
Mosesmann foresees trends to continue to be strong in DRAM, driven by the mobile, cloud, PC, graphics, and auto/industrial businesses. He believes that significant tightness in DRAM throughout the industry will persist. According to the analyst, “because of the transition to the 1α DRAM node (impacts in FY2022), as well as lean inventories, DRAM bit shipments in F4Q are expected to be flat versus F3Q.” Therefore, DRAM pricing is likely to be an upside driver over the next few quarters, he added.
With respect to NAND, some tightness is also expected. He also expects NAND to experience balanced demand/supply dynamics through 2021.
Expressing positive expectations, and considering Micron “as a top pick for the Mother of All Cycles,” Mosesmann maintained a Buy rating and a price target of $165 (98% upside potential) on the stock.
Micron shares have exploded around 70% over the past year, while the stock still scores a Strong Buy consensus rating, based on 16 Buys versus 4 Holds. That’s alongside an average Micron price target of $120.61, which implies 44.7% upside potential to current levels.
Bloggers Weigh In
TipRanks data shows that financial blogger opinions are 100% Bullish on MU, compared to a sector average of 69%.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
