Analysts provide insight on semi-conductor giants QUALCOMM, Inc. (NASDAQ:QCOM) and Micron Technology, Inc. (NASDAQ:MU), providing an earnings preview and rating initiation, respectively. Both are bullish on the two stocks, predicting long term growth despite near term challenges.
Analyst Kulbinder Garcha of Credit Suisse provides his expectations for Qualcomm’s F2:16 earnings set to release on April 20th. Garcha predicts revenues of $5.4 billion and earnings of $1.00 per share for the quarter, slightly above consensus estimates of $5.3 billion and $0.96, respectively. Although the analyst cites several catalysts for the stock, he does not “see the fundamental outlook from an industry TAM perspective (smartphone) improving” for the company. In spite of this, the analyst believes earnings will demonstrate signs of a turnaround.
The analyst provides revenue estimates for QCT of $3.1 billion and MSM unit volume of 183 million, though notes these figures are “conservative.” He believes that despite “potential share loss” in the iPhone to rival chip maker Intel, “the early success of the Galaxy S7” by Samsung, as well as a predicted 50% share in company phones long term, creates “a sustainable lead due to the rising complexity in wireless standards.”
The analyst also comments on recent licensing deals “with all of the major Chinese vendors”, with increasing compliance driving up revenues. He explains, “We see gradual compliance taking effect within China, rising to 85% over time, which could drive QTL revenues to $8.5bn LT.”
The analyst reiterates his Outperform rating and $67 price target on the stock. He explains, “We see recovery at Samsung, a significant buyback, and QTL licensing uptick, all as potential positive drivers for growth. With the stock trading on a P/E ex-cash of 8x ($5.70 LT EPS power), we believe it is inexpensive.”
According to TipRanks, Kulbinder Garcha has a 51% success rate recommending stocks with an average return of 7.9% per recommendation. Out of all the analysts who have rated QCOM within the past 3 months, 58% gave a Buy rating while 42% remain on the sidelines. The average 12-month price target for the stock is $59.86, marking a 17% upside from where shares last closed.
Micron Technology, Inc.
Brean Capital analyst Mike Burton initiated coverage on shares of Micron with a Buy rating and $14 price target after witnessing in improvement DRAM and NAND trends. He states, “We believe MU is well-positioned to take advantage of the long-term favorable trends in DRAM as well as the continued growth and margin improvement in NAND.”
First, the analyst notes a consolidation of the DRAM industry, now marking only 3 companies which represent 90% of the dram market, causing “supply-driven cyclicality.” However, the analyst believes that going forward, supply growth will be “more disciplined” in the industry which should lead to better profitability, especially for Micron. While he notes that 54% of the company’s DRAM business is used in PCs, which have suffered from demand declines, he expects this to turn around. The analyst believes that by FQ3, the company should “achieve double-digit bit growth and related cost reductions” and predicts a similar fate for NAND by next fall. He states, “While the near-term demand environment is weak for both DRAM and NAND, we believe the company is executing on its longer term cost-cutting objectives and we see a potential rebound in demand in the 2H of 2016.”
The analyst concludes, “While MU is unprofitable currently, as we move through the back half of 2016 and expected demand begins to pick up and company specific cost cuts begin to take hold, our earnings estimates begin to turn positive off a depressed base.”
According to TipRanks, Mike Burton has a 58% success rate recommending stocks with an average return of 12.2% per recommendation. Out of all the analysts who have rated the stock in the past 3 months, 65% are bullish, 15% are bearish, and 19% remain on the sidelines. The average 12-month price target for the stock is $14.24, marking a 33% upside from where shares last closed.