Micron Technology, Inc. (MU) Gets a Vote of Confidence from Top Analyst Ahead of Thursday’s Big Earnings Show

One of Wall Street's best performing analyst sees reason to get more confident on MU following encouraging Asia trip takeaways.


Analysts across the Street are hiking price targets on Micron Technology, Inc. (NASDAQ:MU) in bullish anticipation of its second fiscal quarter showcase due Thursday evening.

In reaction, shares are roaring up almost 15% since yesterday, as Street-wide experts clamor for the stock to take off like wildfire.

Top analyst Vijay Rakesh at Mizuho joins the bullish bunch, reiterating a Buy rating on MU stock while jumping the price target from $55 to $66, which implies a 7% upside from current levels.

On back of Rakesh’s trip to Asia, major DRAM-NAND memory test and packaging original equipment manufacturers (OEMs) signal sustained DRAM and NAND demand. In fact, price momentum looks good through the third fiscal quarter, wagers Rakesh.

The analyst continues, “We believe near-term MU estimates appear conservative with potential to guide to ~$3 quarterly EPS (~ $12 annually). We will be meeting many of the memory majors, including Samsung and Hynix, in the coming days. With MU past the seasonally weakest portion of the year (smartphones and PCs), we believe the setup looks good. We believe entering into a stronger build season, MU is well-positioned.”

For the second fiscal quarter, Rakesh calls for $7.27 billion in revenue, $2.72 in EPS, and a 57.3% gross margin- which aligns with Micron’s just-lifted guide. For context, the MU team sets expectations for $7.27 billion in revenue and $2.70 to $2.75 in EPS.

Glancing ahead to the third fiscal quarter, the analyst believes MU will generate $7.14 billion in revenue, $2.49 in EPS, and achieve a 55% gross margin. The Street stands more bullish than even Rakesh, betting on $7.17 billion in revenue from the memory chip giant and $2.59 in EPS. Yet, the analyst acknowledges his forecasts could ultimately prove “very conservative.”

Rakesh boils down encouraging Asia takeaways, including strength in flash demand and pricing rising above oversupply apprehensions: “Given potential for continued server, GPU and enterprise DRAM/NAND demand and price momentum MU could guide quarterly EPS closer to ~$3 EPS (~$12 annually). Our checks on our Asia trip today pointed to continued strong demand and price momentum into JunQ. NAND and DRAM pricing has remained strong despite the concerns of oversupply and demand softness (iPhone X, China). As we have noted prior […], server and GPU demand continue to drive DRAM pricing up in MarQ and potentially into the JunQ.”

Additionally, test capacity keeps rising over 20% through this year, which leaves room for robust capacity requirements from both memory OEMs. Meanwhile, NAND continues to ramp nicely as 64-L NAND spirals from roughly 20% now to around 50% by the close of 2018 for both WDC and Toshiba.

For fiscal 2018, the analyst projects $28.4 billion in revenue from Micron and $10.07 in EPS. By fiscal 2019, the analyst expects Micron will deliver $28.7 billion in revenue and $9.08 EPS. Even with a boosted price target, the analyst believes he is playing it safe with his expectations on this “attractive” and cheap semiconductor player.

Vijay Rakesh has a very good TipRanks score with an 80% success rate and a high ranking of #13 out of 4,789 analysts. Rakesh yields 34.3% in his annual returns. On average, investors following Rakesh’s bets would realize 68.6% in profits on MU stock.

The memory chip giant has earned one a standout rating of confidence on the Street, according to TipRanks analytics. Out of 18 analysts polled in the last 3 months, 17 are bullish on MU shares with just 1 sidelined. The 12-month average price target of $64.06 boasts upside potential of nearly 10% from where the stock is currently trading.