Building on its strong growth momentum over the last few quarters, Micron (NASDAQ:MU) reported another beat/raise quarter. Emerging technologies such as cloud computing, big data, and artificial intelligence are driving strong growth in the industry, while innovation and solid execution has enabled Micron to grow faster than the market.
The chip giant reported FQ3 revenue and non-GAAP EPS of $7.80 billion and $3.15, which compared favorably against consensus estimates of $7.76 billion and $3.13, respectively. Management’s updated guidance had called for a revenue range of $7.20-7.60 billion and an EPS range of $3.12-3.16. Non-GAAP gross margin of 61% was above the high-end of management guidance of 57%-60% and 248 basis points higher than fiscal Q2. Non-GAAP operating expenses were $733 million and roughly in line management’s guidance of $725 million.
Looking ahead, August quarter guidance calls for revenue between $8.00-$8.40 billion, which implies 5.2% quarter-over-quarter and 34% year-over-year growth rates at the mid-point of the guided range and compares favorably to the current consensus estimate of $8.01 billion. The non-GAAP EPS guidance range of $3.30, +/- $0.07 is above the current consensus estimate of $3.16.
MKM analyst Ruben Roy commented, “We continue to view MU shares positively despite continued peaking memory cycle concerns as we believe that the industry wide dynamics related to the challenges of manufacturing node transitions continue to underlie secular changes in the memory industry. In the meantime, we believe that MU’s company specific execution on technology ramps, cost reduction, and balance sheet improvement goals remain positive. We believe that continued execution and achieving cash flow and de-levering milestones should ultimately drive multiple expansion for MU shares. For now, we are once again raising our estimates for fiscal 2018 and fiscal 2019.”
As such, Roy reiterates a Buy rating on Micron shares, while raising his price target to $77 (from $72), which implies a 28% upside from current levels. (To watch Roy’s track record, click here)
Next up is Susquehanna analyst Mehdi Hosseini who opines, “Smartphone builds and continued strength in Enterprise DRAM has enabled Micron to have continued growth in quarterly earnings. Additionally, execution on the operational front, as evidenced by 55% operating cash flow margin and 23% FCF margin, is impressive. And, the guide is actually better than feared as continued rebound in China SP combined with MU’s launch of its new QLC-based 64L 3D NAND SATA SSD are helping it with a better than feared blended ASP mix. Although the company did not provide any color on ASP trends looking into YE 2018, we don’t rule out a correction in DRAM ASPs by year-end. What surprised us is continued push-out in 3D XPoint, its impact on margin profile and how it won’t even become material until YE19. Although the DIMM version of 3D XPoint was not expected to be deployed until 2h 2019, it is surprising to learn that there won’t even be any inventory build in advance. All in all, good quarter and good execution.”
Hosseini maintains a Positive rating on MU stock, with an $80 price target, which represents about 33% upside from where the stock is currently trading. (To watch Hosseini’s track record, click here)
TipRanks reveals the chip giant as one drawing bullish attention on Wall Street. Out of 24 analysts polled in the last 3 months, 18 rate are bullish on Micron stock, 5 are sidelined, while only 1 is bearish on the stock. The 12-month average price target stands at $79.68, marking a nearly 35% upside potential from where the stock is currently trading.