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How Will Weak Guidance Affect Micron (MU) Stock?


Last week, top blogger Bill Maurer cautioned investors that Micron (MU) shares would not bottom until the dust settled, as he says. This is due to concern over DRAM and NAND pricing, which has encouraged analysts to estimate lower revenues for the company.

Wednesday, Micron issued an 8-K release, which revealed the company’s first fiscal quarter will be toward the lower end of guidance, which was between $7.9 billion and $8.3 billion. Non-GAAP earnings per share are expected to be “somewhat above” the previously announced midpoint of $2.95.

Originally, Wall Street had expected revenues of $8.4 billion and non-GAAP EPS of $3.06. The low guidance did not meet expectations, causing analysts to lower the bar. Ultimately, the stock dropped as well. Maurer says the hope analysts had for the stock is dwindling. Micron will release the metrics for FY2019 on December 18th  and the report will highlight the guidance for February 2019.

“At this point, I would not read too much into the increased EPS guidance just yet. That is likely due to the fall in the share price […], which is helping the buyback quite a bit,” Maurer said.

He reminds investors Micron is buying shares of itself on the open market and also had an accelerated share repurchase of $1 billion based on a volume-weighted average over time.

“So as we move closer to Micron’s earnings report in a couple of weeks, the company’s CEO has basically confirmed what most were expecting. Revenues for the quarter are likely to be towards the bottom of guidance, while EPS will be better probably thanks to the buyback. While this will send analyst revenue estimates lower, and thus we could see a full year revenue decline, shares shouldn’t touch new lows in the short term unless there is another round of downside guidance. However, until we see significant evidence that DRAM and NAND pricing has really stabilized, a bottom cannot be put in,” Maurer said.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star blogger Bill Maurer has a yearly average return of 7.5% and a 55% success rate. Maurer has a 7.5% average return when recommending MU and is ranked #75 out of 6,570 analysts.

Is Maurer right about shares having hit the bottom? The stock is up nearly 4% since Friday. TipRanks checked the ratings of 25 analysts who have offered a price target for MU in the last three months. 16 are bullish, 8 are sidelined and 1 is bearish on Micron stock. The consensus price target stands at $59.05, which shows an upside of 47%. (See MU’s price targets and analyst ratings on TipRanks)