Why Analysts Are Growing Even More Bullish on Micron Technology

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Micron Technology Inc. (NASDAQ: MU) reported a strong earnings beat for its most recent quarter, and analysts couldn’t be more thrilled. The stock hit a new multiyear high on Friday following the report, dating back to this time in 2015. We have seen a steady rise in shares since the beginning of 2016, and based on what analysts are saying this could continue well into the future.

24/7 Wall St. has included some highlights from the earnings report, as well was what Credit Suisse and a few other analysts said afterward.

The semiconductor giant posted $0.90 in earnings per share (EPS) and $4.65 billion in revenue, beating consensus estimates from Thomson Reuters that called for $0.85 in EPS and revenue of $4.64 billion. The fiscal second quarter from last year had a net loss of $0.05 per share and $2.93 billion in revenue.

Rising revenues in the quarter were primarily the result of a 21% increase in DRAM average selling prices and an 18% increase in trade NAND sales volumes. The company’s overall consolidated gross margin of 36.7% for the quarter was 11.2 percentage points higher sequentially due to increases in DRAM average selling prices and manufacturing cost reductions for both NAND and DRAM.

Micron’s consensus analyst target price has jumped up to $38.21 as of late Friday, up from $32.88 before earnings. That target from Thomson Reuters was down at $30.33 a month earlier and at $26.58 at the end of 2016.

Credit Suisse maintained an Outperform rating for Micron and raised its price target to $40 from $35. Just two days prior, Credit Suisse had raised the price target to $35 from $30. The brokerage firm said in its report:

We are raising our fiscal 2017 and fiscal 2018 EPS to $4.09 and $5.25 from $3.26 and $4.03 and raising our price target to $40 from $35. While Micron is clearly benefiting from better cyclical pricing, the more important drivers seem more sustainable – mix, cost-downs, and scale efficiencies. Specifically, we believe fiscal third quarter guidance assumes price declines from fiscal second quarter ending run-rates bolstered by positive mix shift to enterprise/cloud SSDs, cost downs for 20nm/1xnm DRAM and 3-D NAND, and lower OpEx. While it’s impossible to completely assuage risk of a cyclical peak, our analysis continues to point to tight supply in DRAM thru calendar 2017, in NAND thru at least calendar third quarter 2017 – with memory becoming structurally more important to system performance and TCO.

Aside from Credit Suisse, a few other analysts weighed in on Micron as well:

  • Barclays raised its price target to $35 from $26.
  • Citigroup raised its price target to $45 from $35.
  • Deutsche Bank raised its price target from $30 to $35.
  • Goldman Sachs raised its price target to $32 from $30.
  • Needham has a Buy rating and raised its target to $50 from $42.
  • Stifel raised its price target to $47 from $40.
  • Susquehanna raised its price target to $35.

Shares of Micron were closed Friday at $28.43, with a 52-week trading range of $9.35 to $29.87. The stock closed the week up 10%.