Micron Technology, Inc. (MU) Stirs Up Ruben Roy’s Confidence on Impressive Execution

Ruben Roy now calls for 20% in return potential for MU shares.

Micron Technology, Inc. (NASDAQ:MU) inspired one bull to get even more bullish on the chip giant’s standout execution.

From margins to generating cash to strides forward in technology, MKM analyst Ruben Roy is out with a research note praising “favorable trends” for Micron’s supply and demand.

Therefore, the analyst reiterates a Buy rating on MU stock while bumping up the price target from $58 to $65, which implies a 20% upside from current levels. (To watch Roy’s track record, click here)

Roy asserts, “We continue to believe that MU and its memory peers are positioned to benefit from continued positive demand trends and a rational supply environment in 2018. Despite expectations for higher industry capex, we continue to believe that the complexities inherent to node transitions in DRAM and higher-layer 3D NAND will naturally limit industry bit growth and, consequently, we continue to believe that this cycle remains poised to be a multi-year event.”

Don’t forget, the analyst notes, this chip giant’s second fiscal quarter print was “solid,” outclassing the MU team’s own positively boosted guide- all while setting forth expectations for the third fiscal quarter that look “strong.”

The only point of caution in Roy’s note is a short-term manufacturing challenge: “MU noted that a disruption in nitrogen supply to one of the company’s five DRAM manufacturing facilities occurred earlier this week and is expected to impact DRAM production.”

However, “Excluding a temporary manufacturing issue, both revenue and EPS guidance for the May quarter are well above current consensus expectations. We believe that continued execution and achieving cash flow and de-levering milestones should ultimately drive multiple expansion for MU shares,” explains Roy.

For context, MU anticipates revenue between $7.20 to $7.60 billion, with a midpoint of $7.4 billion ahead of the Street’s $7.3 billion forecast. Without the manufacturing hiccup, Roy notes the revenue guide could have seen a 2% lift. The MU team anticipates the non-GAAP gross margin to reach between 57% and 60% on back of cost reductions and sustained profitability. The company’s expectations for non-GAAP EPS are ahead of the Street’s $2.64 estimate.

Looking ahead to fiscal 2018, the analyst is more bullish, hiking revenue expectations from $28.1 billion to $29.1 billion and EPS from $9.64 to $10.69. Likewise for fiscal 2019, the analyst jumps up his projections from $27.8 billion to $29.2 billion in revenue and from $8.35 to $9.85 in EPS.

TipRanks highlights a great deal of confidence circling one of Wall Street’s favorite stocks today. Out of 19 analysts polled in the last 3 months, 16 are bullish on Micron stock while 3 remain sidelined. With a return potential of 38%, the stock’s consensus target price stands at $74.83.

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