The tables have turned against Micron (MU) in 2018 as signs of oversupply in the memory industry have started spooking investors. The pullback in DRAM and NAND flash has begun, and the chip giant will have to prove this afternoon that its earnings results can hold up better than in the brutal cycles of the past.
Credit Suisse analyst John Pitzer expects F1Q inline with recent pre-announcement with revenue and EPS of $7.92 and $2.96, respectively. Pitzer expects F2Q revenue and EPS guided to $6.90b-$7.30b/$2.18-$2.32 compared to Street estimates of $7.39b/$2.48, with DRAM/NAND ASPs down 16%/20% q/q. As a result, Pitzer is lowering his FY19/20 EPS to $9.00/$9.15 from $11.09/$10.65. Pitzer’s FY19 estimates embed DRAM/NAND ASPs down 20%/40% y/y.
Pitzer noted, “Despite expected EPS reset, the “setup” is compelling: (1) trough EPS/FCF is conservatively likely by F4Q19 $1.83/$0.89, well above prior troughs, (2) Cost downs flatten out in 1HCY19 but re-accelerate in 2H19 with 1y and 96-layers, and (3) MU trades at 2.0x EV/EBITDA and 1.2x P/B, hard floors as long as EBITDA remains positive.”
All in all, Pitzer remains bullish on MU stock ahead of today’s earnings, with an Outperform rating and price target of $90, which implies about 160% upside from current levels.
Pitzer is one of Micron’s biggest bulls, and he is also one of the top analysts rated who cover the stock. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Pitzer has a yearly average return of 17.6% and a 65% success rate. Rakesh has a 41.8% yearly average return when recommending MU stock, and is ranked #49 out of 5,100 analysts.
Wall Street agrees with Pitzer that this semiconductor giant is one to watch, as TipRanks analytics exhibit MU as a Buy. Out of 25 analysts polled in the last 3 months, 17 are bullish on Micron stock while 7 remain sidelined, and 1 is bearish. With a return potential of 66%, the stock’s consensus target price stands at $57.00. (See MU’s price targets and analyst ratings on TipRanks)