AI Demand, Positive Chinese Market Boost Micron's Pricing Dynamics Ahead Of Earnings, Says Analyst

Wedbush analyst Matt Bryson reiterated an Outperform rating on Micron Technology, Inc MU with a price target of $80.

Micron reports on Sept. 27 after the close. 

The analyst saw a meaningfully different outcome this quarter. While there are certainly still areas of weakness in the memory sector, Bryson saw a few positive inflections setting up more favorable dynamics in the first quarter of FY24. 

Specifically, newer node DRAM was helped by demand for AI continuing to inflect upward, and requirements for DDR5 and HBM3 accelerated over Micron's fourth quarter. And while Micron hasn't yet produced HBM3, the inflection in price in DDR5 should positively benefit results at the margin.

The analyst saw some positive seasonal effects in the Chinese consumer retail space, and a pickup in Chinese builds at certain handset vendors (Huawei and Xiaomi) appeared to have created a better demand backdrop than might have been expected this past summer. 

NAND spot pricing benefited from the abovementioned dynamics, and Samsung's choice to reduce wafers starts further. As such, the analyst sees modest positive implications for the fourth quarter. 

More importantly, these shifts should yield a positive bit and pricing dynamics into CQ1. 

Bryson's significantly better-than-Street estimates reflect many of these changes. 

The analyst projects fourth-quarter revenue of $3.90 billion versus the consensus of $3.91 billion and an adjusted EPS loss of $(1.18) in line with the consensus. He estimates FY23 revenue of $15.43 billion versus the consensus of $15.44 billion and an adjusted EPS loss of $(4.56) versus the consensus loss of $(4.55).

MU Price Action: Micron Technology shares are down 1.03% at $68.96 on the last check Thursday.

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