With One Week to Go Before Micron (MU) Earnings, this Bull Weighs in on the Stock


At Credit Suisse 22nd Annual Technology conference, Micron (MU) warned investors revenue would be “near the low end” of their initial $7.9 billion to $8.3 billion range. Micron CEO Sanjay Mehrotra cited a decrease in overall and market demand for the revision, but still expects strong earnings results.

Indeed, the semiconductor industry, and especially Micron, are notoriously cyclical. They are driven by supply-demand economics which constantly fluctuate between eras of low supply and high demand, and eras of high supply and low demand.

Should you buy Micron shares ahead of earnings next Tuesday? Barclays semiconductor analyst Blayne Curtis says yes. Curtis maintains his Overweight rating with a price target of $50, representing a 42% upside from current levels. (To watch Curtis’ track record, click here)

“As we’ve written before, pricing likely continues to come down into next year but combined with slowing capex, and now some slowing bit outlook, supply and demand should converge into the 2H. MU maintains their belief that in a profitable market with fewer participants, players will act rationally to prolong profits, but the stock likely trades just above BV until the bottom in pricing is better understood. The company did not comment on the February quarter, which we expect to hear more about when MU reports earnings on December 18th. Our CY18 revenue/EPS moves to $31.57B/$12.48 from $31.57B/$12.34 and our CY19 moves to $29.11/$9.56 from $29.30B/$9.53,” Curtis wrote

Curtis cites the “maturation of the memory industry…and better ASP trends” as a contributing factor to his Overweight rating. The analyst believes Micron is “well positioned to benefit” from these trends and will also benefit from improved “relative cost with the ramp up of 1X/1Y nm DRAM and 3D NAND”.

Overall, Wall Street sizes up MU as a ‘Moderate Buy’ stock, as the bulls edge out the cautious on the chip giant. In the last 3 months, Micron stock has received 17 bullish ratings versus 8 analysts hedging their bets, and one bear who doubts the company can secure a turnaround. The 12-month average price target stands at $58.75, marking a nearly 66% upside from where the stock is currently trading. (See MU’s price targets and analyst ratings on TipRanks)

 

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