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Micron Bulls Find More Reasons to Smile
Stock Analysis & Ideas

Micron Bulls Find More Reasons to Smile

The global chip shortage might be causing havoc for industries heavily reliant on semiconductor chips, but the strong demand continues to favor Micron (MU).

The memory giant delivered the goods in its latest quarterly statement and expects the business to keep on outperforming for the rest of the year.

In FQ2, Micron generated revenue of $6.24 billion, a 30% year-over-year uptick and coming in ahead of the Street’s forecast by $30 million. Non-GAAP EPS came in at $0.98, 3 cents above the consensus estimate and at the high-end of Micron’s revised guidance range of $0.93 to $0.98.

With ASPs up slightly quarter-over-quarter, DRAM revenue grew sequentially by 10%, while NAND sales increased by 5% quarter-over-quarter. DRAM generated 71% of the company’s revenue, and Nand flash chip sales amounted to 26%.

Micron expects F3Q (May) revenues to come in between $6.9 and $7.3 billion, higher than Wall Street’s forecast of $6.75 billion. The company’s EPS guidance is in the $1.55-$1.69 range, far higher than the consensus calls for $1.33.

The company also said that as enterprise spending picks up and cloud demand strengthens, data center demand should get an additional boost in the year’s second half.

Not mincing his words, Deutsche Bank analyst Sidney Ho says things are looking “pretty, pretty, pretty good through CY21.”

“MU’s outlook for CY21 in both DRAM and NAND has improved since its last earnings call with strong demand driven by multiple key end markets including cloud, enterprise, mobile and PC,” Ho said. “Post results, we have increased conviction in the business environment for MU in CY21 and believe that the stock should continue to trade at a premium to its historical P/B as it benefits from strong DRAM and NAND markets.”

Accordingly, Ho raised his F3Q EPS estimate to $1.62 from the prior $1.22. For CY21, Ho also increased his EPS forecast – from $6.13 to $7.50.

All in all, there’s no change to Ho’s rating which stays a Buy. The $110 price target remains, too, suggesting upside of 19% over the next 12 months. (To watch Ho’s track record, click here)

Ho’s positive assessment is endorsed by most on the Street. Barring 3 Holds, all 23 other recent MU reviews say Buy, all coalescing to a Strong Buy consensus rating. At $118.84, the average price target implies gains of ~29% on the one-year horizon. (See MU stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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