Technology

Why Analysts Are Cautiously Optimistic About Micron After Earnings

Chris Lange

Published: September 30, 2020 1:33 pm

Although investors were disappointed with the Micron Technology Inc. (NASDAQ: MU) quarterly results reported late on Tuesday, analysts looked further out and were fairly positive on this semiconductor giant despite shrinking their targets.

24/7 Wall St. has included some brief highlights from the earnings report, as well as what analysts said about Micron after the fact.

For the fiscal fourth quarter, the company posted $1.08 in EPS and $6.06 billion in revenue, which compared with consensus estimates that called for $0.99 in EPS and $5.89 billion in revenues.

While the quarterly review is always a focus, it is often the guidance that sets the tone for what is coming ahead. Micron offered guidance for its first fiscal quarter of 2021 as $5.2 billion in revenues, plus or minus $200 million. Refinitiv’s consensus estimate is $5.31 billion. The company also projected a gross margin of 27.5%, plus or minus 1%, or $800 million to $850 million.

BofA Securities reiterated a Buy rating with a $67 price objective. The brokerage firm noted that this quarter was only a temporary setback and that the guidance given for the coming quarter was conservative and there should be decent upside.

Credit Suisse reiterated an Outperform rating and a $90 price target. The firm noted that disappointing gross margin and guidance reflect Micron’s “specific costdown and mix.” The firm also noted that the memory cycle is bottoming and that Micron’s structural position in the market is improving.

CFRA reiterated a Hold rating and lowered its price target to $53 from $55. The firm noted:

Sales rose 11% from Apr-Q, better-than-expected with DRAM increasing 22% (bit shipments up mid-20% range; selling prices down low single-digit percentage) while NAND fell 8% (shipments flat; selling prices down high single-digit percentage). While we think Micron will benefit from ongoing cloud spending and greater content in mobile devices, we see headwinds related to lower enterprise IT spending. In addition, we expect Micron to be among the most negatively impacted by the recent Huawei ban (about 10% revenue impact), which has led us to sharply cut our margin and EPS forecast. That said, we like Micron’s financial position, with net cash of $2.6B and total liquidity of $11.8B.

Here’s what a few other analysts were saying:

• RBC reiterated an Outperform rating and lowered its price target to $57 from $60.
• Needham reiterated its Buy rating and lowered its price target to $65 from $70.
• Deutsche Bank reiterated it as Hold and raised its price target to $51 from $48.
• UBS reiterated a Buy rating and lowered its target price from $63 to $61.
• Mizuho reiterated a Buy rating and lowered its price target to $56 from $58.
• Piper Sandler reiterated a Neutral rating and lowered its target to $45 from $51.
• Cowen reiterated an Outperform rating and lowered its price target to $57 from $60.

Micron Technology stock traded down about 6% to $47.51 on Wednesday, in a 52-week range of $31.13 to $61.19. The consensus price target is $63.47.