Micron Technology, Inc. (MU) Hooks a Bull’s Price Target Vault After Slaying FQ1 Expectations

Have a higher risk/reward tolerance? Loop Capital's Betsy Van Hees says if so, buy into Micron stock.


Micron Technology, Inc. (NASDAQ:MU) shares skipping up 4% after the chip giant went to soar on and above Street-wide expectations following yesterday’s bell with a robust first fiscal quarterly showing for 2018. Not only did the giant trounce predictions for the first fiscal quarter, but the semiconductor player lifted its second fiscal quarter guide, further making a positive splash among investors.

Betsy Van Hees at Loop Capital, one of Wall Street’s best performing analysts praises the “big across-the-board beat” from Micron who “bucks typical seasonality trends” in hiking its second fiscal quarter revenue outlook.

In reaction, the analyst reiterates a Buy on MU stock while boosting the price target from $48 to $56, which implies a 22% upside from current levels.

For the first fiscal quarter, MU posted 2018 pro forma EPS of $2.45 on revenue that surged 11% quarter-over-quarter to $6.8 billion. Consider that the Street had just been calling for $2.20 in EPS from the giant and $6.44 billion in revenue, with the analyst having even more conservative estimates of $2.16 and $6.35 billion. Micron beat out all expectations handily, even topping the tail-end of its own guides looking for $2.09 to $2.23 in EPS and $6.1 to $6.5 billion in revenue. Pro forma GM for the first fiscal quarter reached 55.4%, quite a step up from the fiscal fourth quarter of 2017 where GM had hit 51.3%, towering above the tail-end of the company’s own guide between 50% to 54%. This strength can be attributed to a one-two punch between pricing and product mix, the analyst writes.

Hees underscores, “The big revenue and earnings beat was driven by double-digit QoQ revenue growth in mobile, server, SSDs, and gross margin expansion in DRAM and NAND with DRAM benefiting from continued rise in prices and NAND from cost downs and mix.”

Keep in mind, “FQ2 (Feb) 2018 is typically the seasonally weakest quarter for the overall semiconductor industry, particularly memory,” Hees recognizes, which is what makes Micron’s second fiscal quarter revenue hike from what was expected to be flat to up 6% quarter-over-quarter so impressive. In turn, the company certainly the Street’s forecast of down -8% quarter-over-quarter.

“We continue to expect a soft landing in C2018 for memory supply/demand and believe MU’s cost downs will be able to keep pace with ASP declines. We believe these tailwinds bolstered by strong demand trends from mobile, servers, and SSDs will drive QoQ earnings and revenue growth in F2018,” Hees contends.

Moving forward, this analyst “continue[s] to recommend investors with a higher risk/reward tolerance buy the stock.”

Betsy Van Hees has a very good TipRanks score with a 73% success rate and a high ranking of #67 out of 4,725 analysts. Hees realizes 26.3% in his yearly returns. When recommending MU, Hees earns 58.2% in average profits on the stock.

TipRanks highlights a nearly unanimous bullish consensus parading Wall Street today after Micron’s strong quarterly turnout. Out of 21 analysts polled in the last 3 months, 19 are bullish on Micron stock while just 2 are left hedging their bets on the sidelines. With a solid return potential of 24%, the stock’s consensus target price stands at $56.90.

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