Micron’s (MU) year has been nothing to shout about. The memory chip maker has struggled due to a lack of demand in the memory space as a result of the economic recession caused by the viral outbreak. The macro weakness has been reflected in the share price, too. Unlike many of its peers in the semiconductor segment, Micron stock has failed to ignite. To wit, shares are still down by 9% year-to-date.
With Micron reporting F4Q earnings next week, September 29, could a turnaround be in the cards? Deutsche Bank analyst Sidney Ho is skeptical.
The 5-star analyst expects results to fall within the range Micron provided in its August business update. Of more concern to Ho, however, is Micron’s expectations for the following quarter.
Micron expects F1Q (Nov) revenue to come in below the $5.4-5.6 billion range it forecasted during the F3Q earnings call and has said that slowing demand is behind its lowered expectations. Since then, the sales restrictions to Huawei have come into play which suggests more downside to its F1Q/F2Q business.
Ho, therefore, guides for F1Q revenue of $5.11 billion – down by 13% quarter-over-quarter – but due to the halt in shipments to Huawei and DRAM pricing believes there could be further downside.
“Overall,” the analyst said, “we believe F4Q (Aug) should be ok, but F1Q guidance will likely be very noisy and needs to be further unpacked to understand the puts and takes. Fundamentally, we expect demand for memory products to remain soft in the near term, and would wait for further evidence of inventory destocking across multiple end markets. We should also note that Bloomberg consensus estimates for F1Q (revenue of $5.4b and EPS of $0.72) appear to be stale, but we believe investors are already expecting F1Q guidance to come in below Bloomberg consensus. At the current share price, we believe the risk-reward is fairly balanced, and we would wait for a better entry point.”
Ho’s rating, then, stays a Hold and comes alongside a $48 price target. The figure implies shares will remain range bound for the foreseeable future. (To watch Ho’s track record, click here)
The rest of the Street has a more optimistic take. Based on 17 Buys, 5 Holds and 1 Sell, the stock has a Moderate Buy consensus rating. Given the $63.38 average price target, the analysts expect shares to appreciate by 29% in the year ahead. (See Micron 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.
