Micron Technology Reports Earnings on Wednesday. Here's What to Expect. -- Barrons.com
DOW JONES & COMPANY, INC. 2:55 PM ET 12/16/2019
Symbol Last Price Change | MU | 52.955 | +1.755 (+3.43%) | | QUOTES AS OF 02:56:10 PM ET 12/16/2019 |
Micron Technology (MU) will report financial results for its fiscal first quarter ended Nov. 30 after the close of trading on Wednesday and investors will be looking for signs that their confidence in a turnaround in the memory-chip business is well-placed.
Micron shares have rallied 70% this year, a remarkable result given that revenue was down 23% in the fiscal year ended in August, including a 42% drop in the fourth quarter alone. Micron is among the most cyclical and commodity-like technology companies, its results whipsawed by price and demand shifts for DRAM and NAND memory chips. Excessive capacity in recent quarters has pressured pricing for both DRAM and NAND, and Micron as a key player in both categories has suffered the consequences.
But Wall Street is anticipating a turn -- and that has the stock flying.
The expected pickup isn't likely to be reflected in the quarterly results. Micron's guidance calls for $5 billion in revenue, which would be down 37% year over year, with profit of 46 cents a share, give or take 7 cents. Street consensus calls for $5 billion in revenue and 47 cents. While the consensus calls for revenue to fall further in fiscal year 2020, to $20.6 billion, from $23.4 billion, analysts expect a return to growth in fiscal 2021 and beyond.
For the current quarter ending in February, Street consensus calls for revenue of $4.8 billion and earnings per share of 43 cents.
On Monday, Susquehanna Financial Group analyst Mehdi Hosseini upped his rating on Micron shares to Positive from Neutral, with a new target price of $85, up from $45, in anticipation of a turnaround in DRAM and NAND pricing. He expects the reported results on Wednesday to be in line with guidance and analyst estimates. He thinks consensus for the current quarter is too high, and that EPS guidance will be about 35 cents a share. But he said that investors are "well aware of the downside risk," and that consensus has been moving lower over the past month. "Industry dynamics are improving with increased prospects of tightness and shortages by mid-2020," he said.
J.P. Morgan analyst Harlan Sur repeated his Overweight rating and $65 price target on Micron shares last week, writing that with supply and demand coming back into balance, and with generally lower channel inventory, he sees a pricing recovery in the back half of next year. He expects strong demand from cloud players in 2020, with an additional boost from the rollout of 5G smartphones. "We anticipate Micron to benefit from an improving fundamental environment in 2020, despite near-term choppiness in demand," he wrote.
Deutsche Bank analyst Sydney Ho recently trimmed his estimates for the current quarter to reflect lower demand, reflecting PC microprocessor shortage and softer server demand, given muted enterprise information technology spending. But he said he was "more optimistic about DRAM supply-demand balance in the second half of calendar year 2020 once inventory balances are normalized in the first half." He maintains a Buy rating.
Credit Suisse analyst John Pitzer cautioned that current-quarter guidance could be below Street consensus, but he also sees fundamentals improving throughout 2020. He sees supply already growing more slowly than demand for NAND, and for the same to unfold in DRAM starting this quarter or next. He maintains an Outperform rating and $90 price target on the shares.
Monday afternoon, with a boost from the Susquehanna upgrade, Micron shares were up 4.1%, to $53.30. The Nasdaq Composite Index was up 1%.
Write to Eric J. Savitz at eric.savitz@barrons.com
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