Wall Street Sees More Upside For Micron Following Earnings Pop

Micron Technology, Inc. MU jumped 13% on Wednesday after the memory giant handily topped analyst expectations with big earnings and revenue beats on Tuesday. In addition to surprising to the upside, the report eased investor concerns about the impact of the U.S. blacklist of Huawei, which Micron previously said accounted for about 10% of its total business.

Micron reported fiscal third-quarter EPS of $1.05 on revenue of $4.79 billion. Both numbers topped consensus Wall Street estimates of 79 cents and $4.69 billion, respectively.

Several analysts have weighed in on Micron’s stock following the impressive quarter. Here’s a sampling of what they’ve had to say.

Guidance Hints At Market Improvement

UBS analyst Timothy Arcuri said Micron’s guidance for the second half of the year was also better than many had feared, but suggests a large bounceback in the memory market in the next two quarters.

“Results (though driven by a tax benefit) and guidance were better than feared, and we think that alone is apt to be considered a victory – especially given the Huawei-related volume headwinds MU was thought to be facing,” Arcuri wrote in a note.

Wells Fargo analyst Aaron Rakers said early signs of demand improvement in coming quarters and a significant reduction in fiscal 2020 capex are two bullish developments for Micron.

“Looking forward, Micron noted that it has seen signs of bit demand improvement; cloud data center customers returning to normalizing inventory levels, while enterprise OEM inventory levels remain high,” Rakers wrote.

Not Out Of The Woods

Credit Suisse analyst John Pitzer said it's appearing increasingly likely Micron will remain profitable throughout the current semiconductor market downturn, a telling accomplishment for the company.

“MU is executing well to what they can control – unfortunately, the impact of the US/China trade saga is outside of their control and continues to obfuscate a ‘hard bottom,’ likely keeping the stock range-bound in the NT,” Pitzer wrote.

KeyBanc analyst Weston Twigg said Micron overcame trade war demand hurdles to deliver better-than-feared guidance, but the company isn’t out of the woods just yet.

“Excess supply and inventory remain headwinds, and GM is under pressure,” Twigg wrote.

BMO analyst Ambrish Srivastava said Micron’s impressive quarter once again demonstrated management is both disciplined and credible.

“We see substantial upside in MU with modest downside from current levels, and see book value continuing to rise as FCF stays positive, the main part of our positive stance,” Srivastava wrote.

Ratings And Price Targets

• UBS has a Neutral rating and $37 target.
• 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.
• KeyBanc has an Overweight rating and $45 target.

Micron's stock traded higher by 13% to $36.95 per share at time of publication.

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Photo credit: Mike Deal, Flickr