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Micron Technology, Inc. (MU) Tempts Sidelined Analyst to Get More Confident Ahead of Tomorrow’s FQ3 Earnings Show

Ambrish Srivastava now expects 3% in return potential for the chip giant.


Micron Technology, Inc. (NASDAQ:MU) is readying to dish out its second fiscal quarter earnings tomorrow once the bell tolls and even one analyst choosing to hedge bets lifts target expectations.

BMO analyst Ambrish Srivastava anticipates that the Street is underestimating just how strong the backdrop is for DRAM memory pricing- one which he bets can sustain this strength “well into” the third fiscal quarter.

Meanwhile, between a robust DRAM pricing environment and the chip giant team’s jumped up outlook released in February, Srivastava sees fit to get less cautious on Micron.

As such, in anticipation of tomorrow’s quarterly print, the analyst reiterates a Market Perform rating on MU stock while boosting the price target from $43 to $63, which implies a 3% upside from current levels. (To watch Srivastava’s track record, click here)

“Forget knocking the cover off the ball, we have not even hit a single when it comes to our coverage of Micron, so far,” admits the analyst, who notes: “Memory industry fundamentals, especially for DRAM, remain strong. Pricing in particular is stronger than what we had been modeling for.”

Srivastava explains his surge in optimism as he plays “catch up” on the giant: “As we head into Micron’s earnings this week, we are raising our estimates largely due to continued strength in DRAM. While we are roughly in line with consensus for F2Q, for F3Q we believe that consensus estimates likely do not appropriately reflect ongoing strength in DRAM pricing in F3Q. Hence, our estimates are higher for F3Q.”

For the second fiscal quarter, the analyst largely levels with consensus on expectations, angling for a 7% quarter-over-quarter rise to $7.275 billion in revenues and $2.73 in EPS.

However, for the third fiscal quarter, Srivastava stands more confident than the Street. Whereas the analyst projects MU will see a 2% quarter-over-quarter rise to $7.39 billion in revenues, the Street hovers below at $7.25 billion. Additionally, though the analyst bets on $2.78 in EPS, consensus forecasts $2.62.

“We are raising our estimates primarily due to higher revenue and GM, driven by higher DRAM ASP, partly offset by higher opex and tax rate. Our FY18E/FY19E EPS go to $10.71/$8.24 from $9.51/$7.13. Our CY19E EPS go to $7.67 from $6.66.”

“Driven by a stronger nearer-term fundamental backdrop for memory,” Srivastava highlights a positive perspective on Micron. Yet for now, this analyst is staying on the sidelines.

This chip giant flashes a strong bullish backing on TipRanks, making this stock a Wall Street favorite. Out of 16 analysts polled in the last 3 months, 35 are bullish on MU stock while only 1 plays it safe on the sidelines. With a return potential of 14.5%, the stock’s consensus target price stands at $69.80.