All Eyes on Micron’s (MU) F3Q18 Earnings This Evening

One of the most anticipated reports of the entire earnings season will be released after today’s closing bell. J.P. Morgan’s Harlan Sur and Nomura’s Romit Shah weigh in on Micron (NASDAQ:MU) earnings.

J.P. Morgan analyst Harlan Sur remains positive heading into this evening’s call, following Micron’s recent positive preannouncement, and the analyst’s view on continued supply/demand balance through next year.

Sur opined, “In conjunction with Micron’s recent analyst day, we raised our 2018 estimates and introduced our 2019 estimates where we see continued strength and strong execution amidst a relatively balanced supply/demand environment. Additionally, following the seventh consecutive positive near-term revision to our Global Memory Market update which was published Friday and has been a good near/mid-term positive indicator for both financial and stock performance, we are incrementally boosting our estimates. We also highlight a few key takeaways from our recent annual CIO survey that indicates cloud spending fundamentals should remain strong over the next few years. We anticipate the team driving strong free cash flow generation over the next few years and remind investors of the company’s plan to return at least 50% of free cash flow to shareholders starting in FY19.”

As such, Sur reiterates an Overweight rating on Micron shares, with a price target of $82, which represents a potential upside of 38% from where the stock is currently trading. (To watch Sur’s track record, click here)

Nomura analyst Romit Shah is even more bullish on the stock, reiterating a Buy rating with a price target of $100, which implies a 68% from current levels. (To watch Shah’s track record, click here)

Shah noted, “We expect Micron to guide revenue and EPS modestly above consensus again for the August period driven by stability in 4Gb and 8Gb DRAM. We expect revenue guidance to be in the range of $7.9-8.3 billion (consensus $8.0 billion) and EPS guidance to be in the area of $3.25 (cons. $3.16).”

Furthermore, “We believe that Micron’s NAND ASPs will decline only modestly in the May period (mid-to-high single digits), thus alleviating concerns about oversupply. The Street is overly concerned about NAND industry pricing given weakness at Samsung. However, we estimate that Samsung began the year with NAND ASPs 50-100% above the industry average. Samsung’s ASPs, in our view, are resetting at a faster rate to be more in line with the rest of the NAND industry. In addition, we believe that Micron is gaining market share in SSDs, which carry higher ASPs and margins than trade NAND revenues. As such, we expect Micron’s NAND ASPs will decline much less than the prior period (-14% qoq).”

If we turn to the Street in general, we can see that the stock also has a Buy analyst consensus rating. In the last three months, Micron has received 18 buy, 4 hold and 1 sell ratings. These analysts have an average price target on the stock of $78.19, suggesting just over 30% upside.


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