It has been a decent week for investors of chipmaker Micron (MU). Monday June 29 saw the release of the company’s fiscal 3Q20 earnings report, in which Micron posted beats all around. The market was impressed by the print, and on Tuesday June 30, sent shares up by a tidy 5%.
There was a lot to like in Micron’s quarterly statement, and a good deal to look forward to.
On the top-line, Micron beat the estimates by $130 million, delivering 13.6% year-over-year growth to reach revenue of $5.44 billion. The bottom-line result also came in ahead of the consensus estimate by $0.06, as Micron posted non-GAAP EPS of $0.82. Gross margins of 33.2% beat the Street's 32.8% call.
Broken down into segments, with bit shipments up 10%, DRAM (memory) revenue increased quarter-over-quarter by 16%. Additionally, NAND (storage) revenue was up 10% compared to the previous quarter.
Looking ahead to fiscal 4Q, Micron’s guidance is above the estimates, too. The chipmaker forecasts revenue of between $5.75 billion and $6.25 billion ($6 billion at midpoint), ahead of the Street's call for $5.46 billion. Micron expects to deliver non-GAAP EPS in the range of approximately $1.05 (give or take $0.10), which is above the $0.79 per share consensus estimate.
With higher ASPs (average selling prices) and shipments in the quarter indicating low supply and strong demand, the cyclical nature of Micron’s industry appears to be turning in its favor. Needham analyst Rajvindra Gill agrees, and despite the current unprecedented challenges, he expects Micron to deliver the goods.
The 5-star analyst said, “Heading into C2H20, MU expects data center demand to remain healthy and mobile to continue to improve. Cloud customer inventories remain healthy, while mobile is a bit elevated in anticipation of demand, as well as COVID-19 and geopolitical supply chain factors… Although we acknowledge that near-term visibility across end markets is limited due to COVID-19 & macro uncertainties, we view MU as a key beneficiary of secular trends of higher memory content in 5G handsets and data center demand.”
To this end, Gill is staying with the bulls. In addition to reiterating a Buy rating, the analyst upped his price target from $63 to $70. The implication for investors? Upside potential of 41%. (To watch Gill’s track record, click here)
Micron’s Moderate Buy consensus rating is based on 18 Buys, 7 Holds and a lone Sell. Over the next year, the analysts expect shares to appreciate by 33%, as the $66 average price target implies. (See Micron stock analysis on TipRanks)