Wall Street Remains Bullish On Micron

Micron Technology, Inc. MU shares traded higher by 9 percent Thursday after the chipmaker reported second-quarter earnings and revenue beats.

The results were a pleasant surprise for investors concerned about the impact of a memory supply glut glut driven by a softening global smartphone market. Micron previously warned investors the ongoing U.S. trade war with China is weighing on its business. While earnings per share of $1.42 exceeded consensus expectations, it was down significantly from $2.67 in the same quarter a year ago.

Several Wall Street analysts weighed in on Micron following the earnings beat. Here’s a sampling of what they’ve had to say.

Better Than Feared

Credit Suisse analyst John Pitzer said evidence is mounting that Micron’s business woes have reached a near-term bottom.

“While F2Q Inv dollars increased 13% q/q and 27 days to 134, results increase conviction of a bottoming process and hard bottom likely in F4Q, with the key incremental info from earnings that MU modestly reduced CapEx to $9 bb from $9.25 bb (now down $1.5 bb from original guide) and more importantly is reducing DRAM utilization – historically the last sign-post of a cyclical bottom, albeit usually done below cash cost,” Pitzer wrote in a note.

Wells Fargo analyst Aaron Rakers said Micron’s fiscal third-quarter guidance was better than feared as the company continues to shrink its supply base.

“While Micron’s F2Q19 results / F3Q19 outlook highlights persisting weak DRAM and NAND Flash demand trends, we think shares have positively reacted to the company’s continued commitment to supply-side rationalization – or what we continue to view as positively indications on the company’s focus on driving sustained positive FCF,” Rakers wrote.

BMO Capital Markets analyst Ambrish Srivastava said fundamentals in the memory market remain ugly, but Micron is making the right moves.

“The company is idling capacity and reducing wafer starts, lowering CapEx again, with plenty of firepower on that front if fundamentals were to get worse, and they likely will,” Srivastava wrote.

Long-Term Opportunity

MKM Partners analyst Ruben Roy said micron is proactively adjusting its business to the weak market, and there are signs it is approaching a cyclical bottom.

“We continue to recommend MU shares following fiscal Q2 earnings given our belief management continues to execute well in a challenging environment,” Roy wrote.

KeyBanc analyst Weston Twigg recommends investors take advantage of near-term weakness to accumulate Micron shares.

“MU is managing through this soft period well and long-term drivers should become significant tailwinds in F2020 and beyond, in our view,” Twigg wrote.

Raymond James analyst Chris Caso said each quarter Micron is edging closer to capitulation.

“We think that’s an important step in getting to the bottom for pricing and Micron fundamentals. Going forward, we do agree that seasonality would likely drive some 2H demand improvement – the outstanding question is how long the inventory accumulated by Micron and competitors will delay fundamental improvement,” Caso wrote.

Ratings And Price Targets

• Credit Suisse has an Outperform rating and $90 target.
• Wells Fargo has an Outperform rating and $50 target.
• BMO has an Outperform rating and $50 target.
• MKM has a Buy rating and $50 target.
• KeyBanc has an Overweight rating and $49 target.
• Raymond James has a Market Perform rating and no target.

Shares traded higher by 9.5 percent to $43.95 at time of publication.

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Photo courtesy of Micron.