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Micron: The Turnaround Gathers Pace

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support@smarteranalyst.com (Ben Mahaney)
·2 min read
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For Micron (MU), the end of 2020 was marked by a shift from a company struggling under difficult macro conditions and the semiconductor industry’s cyclical nature to one offering a more optimistic outlook. The transition got full confirmation last Thursday when the memory giant beat the estimates in its latest quarterly results.

In F1Q21, Micron delivered revenue of $5.77 billion, a 12.3% uptick over the same period last year, while beating Street’s forecast by $110 million. FQ1 Non-GAAP EPS of $0.78 came in $0.09 above consensus.

The company’s guidance for the next quarter was also a display of strength, with revenue anticipated to come in between $5.6 billion to $6 billion, above the $5.52 billion of revenue Street analysts were calling for.

Evidently, demand for Micron’s memory products is on the rise. The trends are in Micron’s favor, too. 5G smartphones require more DRAM memory and the company is well positioned to benefit as 5G use becomes more prevalent in the years ahead.

Susquehanna analyst Mehdi Hosseini says that despite the bullish sentiment, Micron’s tone on the earnings call was one of caution, which reminds him of the noises made in the previous earnings call. Yet, he sees this vigilant position as a positive.

“We actually favor conservatism especially in the current environment where customers are unwilling to commit to more than a few months of shipment contracts,” Hosseini said.

However, Hosseini tells investors to “focus on earning power a year out.” And in this regard, the analyst is unequivocally positive.

“We argue MU remains on pace to exit 2021 with well over $2 of quarterly earnings,” the 5-star analyst opined. “In fact, after two years of recession in earnings (FY/CY 19-20), compares are favorable, pricing dynamics changing to favor suppliers, and there are increased prospects of quarterly operating margin doubling over the next year."

As a result, Hosseini reiterated a Positive (i.e. Buy) rating on MU, while increasing his price target from $90 to $100. The new figure implies a 26% upside potential from current levels. (To watch Hosseini’s track record, click here)

Hosseini’s bullish assessment is no anomaly on Wall Street. The stock currently boasts 23 Buys alongside 2 Holds, all adding up to a Strong Buy consensus rating. At $96.92, the average price target is set to provide gains of 22% over the next 12 months. (See Micron stock analysis on TipRanks)

To find good ideas for chip stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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