Micron’s Outlook Misses the Mark, but the Stock Is a Buy, Says Raymond James
Stock Analysis & Ideas

Micron’s Outlook Misses the Mark, but the Stock Is a Buy, Says Raymond James

Everyone is reeling from the global economic downturn, and it looks like Micron (MU) is feeling the pinch too. The memory giant delivered a solid FQ3 report but disappointed on the outlook, which came in way below expectations.

For the quarter, revenue rose by 16% year-over-year to $8.64 billion, in-line with Wall Street’s forecast while adj. EPS of $2.59 beat the $2.44 consensus estimate.

However, for FQ4 (August quarter,) revenue is expected to reach $7.2 billion, give or take $400 million, amounting to a 17% sequential drop at the mid-point and some way short of the $9.3 billion analysts predicted.  

The company put the blame on Covid lockdowns in China and soft demand for consumer products, plus smartphone demand is also waning. As such, for the calendar year 2022, Micron expects smartphone-unit volume will drop by mid-single-digits year-over-year. In contrast, Wall Street’s earlier forecast called for mid-single-digit percentage growth.

To counter these trends, Micron announced that it will reduce some of its fiscal 2023 capital investment on wafer fab equipment, the machinery used by semiconductor manufacturers to create wafers in fabrication factories.

Although the anticipated headwinds are reflected in the FQ4 outlook, considering the increasingly bearish macro concerns, Raymond James’ Melissa Fairbanks says the “reset was generally expected.”

“That said,” the analyst went on to add, “we are encouraged by the company’s commitment to protect profitability, and while it may take time for the overall market to respond to lower demand signals, MU’s decision to reduce bit output and cut capex for FY23 sets the company up to better weather near-term turbulence – executing toward the cross-cycle profitability targets.”

Additionally, Fairbanks believes that through the current cycle, an “incremental buffer to margins versus peers,” is provided by Micron’s technology and cost advantage in the industry.

To this end, Fairbanks rates Micron shares a Strong Buy along with a $72 price target. Should the figure be met, investors will be sitting on returns of ~31% in a year’s time. (To watch Fairbanks’ track record, click here)

Micron gets another Strong Buy from the analyst consensus view, based on 20 recent Buy ratings, 5 Holds, and a single Sell. The shares are priced at $55.09 and their average price target of $81.35 implies ~48% upside from that level. (See MU 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.


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