As expected, buying Micron (NASDAQ:MU) shares ahead of its annual analyst day meeting today, turned out as a smart move. Why? The chip giant increased its quarterly outlook above what it predicted in March, saying it expects revenue this quarter of $7.7 billion to $7.8 billion (up from a prior range of $7.2 billion to $7.6 billion), and earnings per share of $3.12 to $3.16 (up from a prior range of $2.76 to $2.90). In addition, the company announced a $10 billion share repurchase program, sending investors into a frenzy in the afternoon. As of this writing, Micron shares are up nearly 8% to $57.60 (including after hours trading).
Rosenblatt Securities analyst Hans Mosesmann, who is attending the event, shares early thoughts: “Micron CEO Sanjay Mehrotra kicked off the New York investor meeting today covering memory/storage markets, industry structural changes, and the new Micron. On the structure side, Mr. Mehrota made the case that both DRAM and NAND supply growth is moderating as process node transitions require more and more CapEx intensity while providing reduced percentage “bit” gains. To achieve 20% bit DRAM bit supply today requires an industry investment of ~$20 billion, when in 2015 it would have required ~$13 billion. For NAND 40% bit supply today’s investment is nearly $23 billion when in 2015 it would have been ~$13 billion. Micron sees DRAM and NAND bit supply growth beyond CY18 at 20% and 40% respectively.”
“Net net, so far into the keynote, the structural view of the memory/storage markets suggests a prolonged cycle with sustainable profitability,” the analyst concluded.
Mosesmann rates Micron stock a Buy with a price target of $100, which represents a potential upside of 80% from where the stock is currently trading. (To watch Mosesmann’s track record, click here)
Most analysts back Mosesmann’s confident take on the chip giant, as TipRanks analytics showcase MU as a Strong Buy. Based on 23 analysts polled in the last 3 months, 19 rate a Buy on Micron stock while3 issue a Hold, and only one recommends a Sell. The 12-month average price target stands at $74.23, marking a nearly 34% upside from where today’s closing price.