Analysts Remain Bullish on Micron Despite Lower Than Expected Q2 Guidance
Micron Technology (NASDAQ: MU) announced their first quarter fiscal 2015 earnings report late Tuesday, January 6th, missing revenue expectations and reporting a lower than expected second quarter guidance. As a result, Micron shares opened down 2.2% in trading on Wednesday.
Highlights from the earnings report include earnings of $0.97 per share on a non-GAAP basis excluding items for the quarter ended December 4th, beating analyst expectations of $0.92 earnings per share and increasing 26% from the same quarter last year. Revenue increased 13% to $4.57 billion, missing analyst expectations of $4.61 billion.
Micron also announced their second-quarter forecast to be $4.1 billion to $4.3 billion in revenue, well below analysts’ expectation of $4.5 billion.
Micron Technology CEO Mark Durcan commented on the lower guidance, saying “For a seasonally weak quarter anyway, Micron Technology’s guidance of $4.1 billion to $4.3 billion is pretty good.” However, Durcan expects “continued favorable market conditions for 2015 led by constrained supply in DRAM (dynamic random-access memory, the main memory in personal computers) and solid demand for both DRAM and Nand” flash memory. He concluded, “Demand growth in our business continues to be driven by our customers rapidly increasing memory content to enable them to enhance the performance of their products, as opposed to strictly unit growth of end systems… The resulting demand outlook remains very encouraging.”
A handful of analysts weighed in on Micron Technology following their first quarter earnings report.
On January 7th, Stifel Nicolaus analyst Kevin Cassidy reiterated a Buy rating on Micron with a $43 price target, though he also slashed his 2015 earnings estimate by 5% to $3.95. Cassidy reasoned his Buy rating, saying “Micron reported solid results for the November-ending quarter, beating both our and consensus earnings estimates,” however, the cut in his 2015 earnings estimate stems from “the increasing capital intensity of DRAM manufacturing has caused the industry to slow capacity expansion.”
Kevin Cassidy has rated Micron 14 other times since April 2009, earning an 85% success rate recommending the stock and a +82.8% average return.
In the past year, Cassidy has made 69 successful recommendations out of 90 total, earning a 77% success rate recommending stocks and a +33.1% average return per recommendation.
Needham analyst Rajvindra Gill also reiterated a Buy rating on Micron on January 7th with a $60 price target following the release of their first quarter earnings report. The analyst noted, “MU issued strong results for F1Q15 but offered light guidance for the Feb qtr due to supply constraints related to technology deployment… While we are disappointed in the guidance, DRAM pricing remains solid and we believe the technology advancements will serve as favorable catalysts longer term as MU positions itself to meet continually growing memory demands.”
Rajvindra Gill has rated Micron 12 other times since December 2013, earning an 82% success rate recommending the stock and a +20.9% average return per recommendation.
Gill has made 61 successful recommendations out of 101 total in the past year, earning a 60% success rate recommending stocks and a +17.0% average return per recommendation.
However, not all everyone is as positive about Micron as Goldman Sachs analyst Mark Delaney maintained a Neutral rating on the stock and cut his price target 9% to $29 on January 7th. Delaney reasoned his Neutral rating, stating “While Micron’s plan to grow bits slightly below the market in 2015 will help to maintain pricing; we believe that record high DRAM margins (we estimate that Samsung’s commodity DRAM EBIT margins are over 50%) will continue to attract supply from competitors.” In addition, “Rising capex (and opex) costs will likely remain a headwind for cost per bit.”
Mark Delaney has made 10 successful recommendations out of 14 total in the past year, earning a 71% success rate recommending stocks and a +9.8% average return per recommendation.
On average, the top analyst consensus for Micron Technology on TipRanks is Strong Buy.