Pricing And Supply Could Result In A Roller-Coaster Year For Micron Investors

Micron Technology, Inc.'s MU “extraordinarily strong” guidance for FQ3 is a “testament to the memory pricing environment” as well as the company’s own execution, the Inotera acquisition and the aggressive ramp of 3D NAND, Pacific Crest’s Weston Twigg said in a report.

While reiterating a Sector Weight rating on Micron, Twigg significantly raised the estimates. The fair value is at around $32.

He added, “While we think the stock should be trading higher, we remain Sector Weight primarily because we anticipate memory pricing volatility by late 2017.”

Related Link: Micron Begins Delivering Higher Cyclical Peaks

Guidance

Micron would likely continue to benefit from ongoing ASP [average selling price] strength, which supports its guidance for a meaningful expansion in non-GAAP gross margin to 44-48 percent, from 38.5 percent in FQ2 and 17.4 percent in FQ3 last year. Revenue and EPS are also expected to grow significantly in FQ3, Twigg mentioned.

“Micron is benefiting to an almost comical degree from strong memory trends, and these could last at least into late this year,” the analyst commented.

The EPS estimates for FQ3, 2017 and 2018 have been raised from $0.86 to $1.57, from $2.88 to $4.35 and from $2.73 to $3.62, respectively.