Memory giant Micron (MU) will take center stage next week when it delivers May quarter (F3Q) results on Wednesday (June 30, AMC). As the company already made a positive preannouncement on the quarter’s action a few weeks ago, Deutsche Bank’s Sidney Ho isn’t anticipating “many surprises.”
Micron sees revenue coming in at or even above the high end of the original $6.9-7.3 billion range it guided for, while EPS (between $1.55-1.69) and gross margins are also expected to put in a strong display.
“The upside in the quarter appears to be widespread,” Ho said, “With MU noting that ASPs in both DRAM and NAND are leading to the raised expectations.”
With a strong showing virtually in the bag, Ho thinks investors’ focus has already turned to F4Q and the outlook for the rest of CY21. It’s here where things become less certain, where “more moving parts,” could impact performance.
One issue concerns bit shipment growth, as due to the planned technology node transition to 1-alpha, MU has already suggested it anticipates DRAM bit shipment growth in F4Q to be “flattish” sequentially.
“However,” Ho cautiously adds, “There could be additional pressure from non-memory component shortages in the PC market and inventory build in the smartphone market.”
Pricing wise for DRAM in the August quarter (FQ4), the range of expectation appears to be quite wide, from a low-single digit sequential rise all the way up to the mid-teens.
Although Ho admits data points “have started to become more mixed,” the analyst still thinks expectations are too downbeat.
“We believe that Street numbers still need to come up for F4Q and guidance is likely to continue to point towards low double-digit revenue growth q/q despite increased uncertainty,” the 5-star analyst said.
Ho calls for F4Q revenue of $8.26 billion (a quarter-over-quarter increase of 12%) and EPS of $2.50 vs. the Street’s forecast for 7.83 billion and $2.14, respectively.
All and all, Ho rates MU shares a Buy, and his $110 price target indicates potential one-year gains of 34%. (To watch Ho’s track record, click here)
Contrary to earnings expectations, where the stock’s price target is concerned, Ho’s colleagues project even stronger upside. The figure clocks in at $118, suggesting 44% of share appreciation over the coming months. Rating wise, Micron gets a vote of confidence too; based on 17 Buys vs. 4 Holds, the stock has a Strong Buy consensus rating. (See MU stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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