Chip giant Micron (MU) will be in the spotlight when it reports fiscal fourth-quarter results on Thursday afternoon. As the countdown to Micron earnings starts, Wall Street’s confidence backing the stock is strong. About 77% of the analysts surveyed by TipRanks have a Buy rating on MU. (See MU price targets and analyst ratings on TipRanks)
However, Micron is not without skeptics, especially those who believe the chip giant is at a peak in memory pricing. One skeptic is BMO’s Ambrish Srivastava who reiterates a Market Perform rating on MU, while slashing the price target to $45 (from $63), which represents a slight upside potential from current levels.
Srivastava wrote, “While weakness in NAND pricing has been a concern for some time, the fundamentals in DRAM on the pricing front have decelerated as well. Sell side downward estimate revisions are only just beginning, in our view. No changes to our already lower-than-consensus estimates.”
The analyst continued, “For FY4Q18, we expect revenue of $8.20 billion, up 5% q/q and EPS of $3.30, roughly in line with consensus’ $8.25 billion, up 6% and $3.32, respectively. For FY1Q19, we expect revenues of $8.25 billion, roughly flat q/q, and EPS of $2.89, vs. consensus’ $8.49 billion, up 3% q/q and $3.11, respectively. Cyclical stocks ought to trade at lower P/E multiples closer to the peak of the cycle, where we are currently for Micron.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ambrish Srivastava has a yearly average return of 11.5% and a 72% success rate. Srivastava has a average return when recommending MU, and is ranked #611 out of 4876 analysts.
Heading into earnings, Micron shares are currently trading at $43.81, down $0.49 or -1.09%.