Ahead of Micron’s (MU) fiscal fourth quarter statement (August quarter), the company said revenue will most probably come in at or beneath the low end of its previously guided range of $6.8-7.6 billion. The memory giant pointed to end demand softness in PCs and Smartphones and a higher than anticipated need by customers to reduce inventories as the reasons behind the downturn.
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That certainly played out; in FQ4, revenue fell by 19.7% from the same period last year to $6.64 billion, in turn missing the Street’s call by $140 million. The company managed a better performance on the profitability profile, as FQ4 adj. EPS of $1.45 beat the Street’s expectation for $1.37.
However, the company missed big on the outlook, with management noting “macroeconomic uncertainty is high and visibility is low.”
For the November quarter (FQ1), Micron is forecasting revenues of $4.25 billion, some way below the consensus estimate of $5.75 billion. Likewise on the bottom-line; the company expects EPS of $0.04 at the mid-point, but the Street was looking for $0.72.
However, bucking the trend of shares falling off a cliff following such a disappointing outlook, MU shares had no such problem in the subsequent session, even tilting slightly into the green on another down day for the markets.
And that could be down to the Street already expecting the worst. Furthermore, boosting confidence in the long-term story, as Rosenblatt’s Hans Mosesmann says, Micron has “signaled the November quarter as a bottom with the February quarter the transition point of demand and supply starting the process of balancing.”
As such, there’s no change to the tone of Wall Street’s most prominent MU bull, who calls the company the “best cycle play for 2023.”
“We like the risk/reward here for MU as investors seeking comfort in some visibility of a bottom now have this with the guide into early 2023,” the 5-star analyst said. “The industry supply growth of mid-single digits for DRAM may be a low growth rate since the 90s and sets up a supply/ demand dynamic that is highly attractive for investors on a memory/storage snapback in 2024 and likely S/D mismatch into 2024.”
To this end, Mosesmann reiterated a Buy rating backed by a $100 price target. The implication for investors? Upside of 100% from current levels. (To watch Mosesmann’s track record, click here)
Not all back Mosesmann’s stance; while the stock receives 20 Buys, with the addition of 5 Holds and 2 Sells, the analyst consensus rates this name a Moderate Buy. Going by the $65.4 average target, investors will be sitting on returns of 30% a year from now. (See Micron stock forecast 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.
