Susquehanna Sets Expectations on Micron (MU) Ahead of Earnings

On Wednesday, Micron (NASDAQ:MU) will report its fiscal third quarter earnings after market close. No doubt, this will be a critical announcement, as Wall Street already baked in quite a bit of the good news during the past few months. For the year so far, Micron stock is up a sizzling 42%.

OK then, so what are the expectations for the MU earnings report? Wall Street expects the chip giant to earn $3.12 a share, up 93% year over year, on sales of $7.75 billion, up 39%.

Susquehanna analyst Mehdi Hosseini remains above-consensus for 2019 earnings. The analyst’s FY19 EPS estimate of $12.34 is above consensus of $10.92. For the Aug Q, Hosseini expects MU’s EPS guide to come in between his estimate of $3.28 and consensus of $3.16, and rationale being that NAND ASPs come in worse than expected (down 10-15% Q/Q) with DRAM flattish.

The analyst reiterates a Buy rating on MU stock, with a price target of $80, which represents a potential upside of 37% from where the stock is currently trading. (To watch Hosseini’s track record, click here)

Hosseini stated, “With buy-side expectations already brought down over the past few weeks, we believe a slight upside to consensus is constructive. However, the key question is: what would the company’s earnings be if DRAM ASPs were to go through a modest correction by YE18? This is where MU’s efforts in structural improvements will be the key wild card in minimizing downside risk.”

“MU said all the right things at its Analyst Day (supportive of our trough EPS contention), but we await signs of further execution. We expect shares to be range-bound N-T until it’s proven MU can deliver trough earnings, especially as DRAM (70-75% of total Rev with current GM of 65-70%) experiences an ASP correction into YE18. We maintain our Positive rating and L-T view given the confluence of a consolidated industry, increased bit demand by Enterprise/Cloud, and cost execution, that can lead to higher peak and trough earnings,” the analyst concluded.

It appears the voice of the Street backs Hosseini’s bullish stance on the chip giant. Out of 6 analysts polled by TipRanks in the last 3 months, 18 are bullish, 5 are sidelined and only 1 is bearish on Micron stock. With a return potential of nearly 33%, the stock’s consensus target price stands at $77.50.


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