No Room for Error in Micron Technology Earnings Report

The Thomson Reuters consensus estimate is for $0.70 in operating earnings per share (versus only $0.04 a year ago, and higher since just last week), and the revenues are expected to have risen by 67% to $3.89 billion. The consensus estimates for the coming quarter are $0.77 in per-share earnings and a 42% gain in revenue to $4.05 billion.

An additional driving force for Micron was an increased revenue guidance from Intel, citing business PC demand. When new corporate PC upgrades take place, the amount of DRAM in each replacement is often increased exponentially. As always, investors will be paying attention to new opportunities and the ongoing growth of flash for the company.

Note that options traders, using the weekly expiration call and puts, are calling for a move of up to almost $2 per share in either direction. There is also a higher open interest in the out-of-the-money puts versus the out-of-the-money calls. Rather than assuming that this means everyone is bearish, the run up from $26 to $32 likely left a lot of put buyers in the dust who just never covered or exited their short-term trades.

Goldman Sachs named Micron one of the top holdings of hedge funds. Analysts on Wall Street have kept raising their ratings and targets, and Micron has risen far higher than many analysts were expecting.

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Some of the more recent Wall Street analyst calls ahead of earnings were as follows:

• RBC Capital Markets maintained its Outperform rating on June 20 and raised its price target to $38 from $34.
• Raymond James reiterated its Buy rating and raised its price target to $40 from $30.
• R.W. Baird raised its rating to Outperform from Neutral, and the price target was raised to $42 from $25.
• Bank of America Merrill Lynch got back on the Micron bandwagon, raising its rating all the way from an Underperform to Buy, and the price target was raised to $40 from $32 in the call.
• Credit Suisse recently reiterated its Outperform rating, but it jacked its price target all the way up to $50 from $30. That is the street-high target price.

At $31.98 ahead of earnings, Micron shares have a 52-week trading range of $12.31 to $32.43, and the consensus price target is $35.33. Micron is now worth $34 billion in market capitalization. If Micron stumbles after earnings, it could pull down all sorts of the supply chain companies tied to DRAM, flash and physical data storage.

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