Why Analysts Are Still Bullish on Micron Technology

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Micron Technology Inc. (NASDAQ: MU) released fiscal second-quarter financial results after markets closed Thursday. Ahead of the report, the stock was up massively this year and analysts had been chasing Micron even higher. Despite a setback with this latest report, analysts still seemed overly positive on the stock.

24/7 Wall St. has included some highlights from the earnings report, as well as what analysts are saying about the semiconductor giant after the fact.

The company said that it had $2.82 in earnings per share (EPS) on $7.35 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $2.74 in EPS on revenue of $7.28 billion. The same period of last year had EPS of $0.90 and $4.65 billion in revenue.

What stands out here is that gross margin for the quarter was 58.4%, which rose dramatically from 38.5% in the same period of last year.

Merrill Lynch reiterated a Buy rating with an $85 price objective. The brokerage firm gave its investment rationale as follows:

Our Buy rating is based on a favorable memory chip environment (less competition with Samsung, Toshiba’s restructuring, diversified demand, content increase per box, ASP strength). We believe high margin profile will be more notable through FY18, then a soft landing in FY19-20. Upcycle fair value with record high margin/ROE is applied to derive PO, and implied P/B is 30-40% higher than historical average.

Credit Suisse reiterated an Outperform rating with a $70 price target. The firm pointed out that while NAND pricing was down 15% quarter over quarter in the fiscal second quarter on mix, NAND gross margin increased 140 basis points quarter over quarter adjusted for about a 350-basis-point impact for underutilization of XPoint capacity, indicating that the NAND cost improvement story is still very much intact. Credit Suisse expects underutilization charges to continue for the next several quarters, masking true profitability.

A few other analysts weighed in on Micron after the report:

  • Bernstein has a Market Perform rating and raised its price target to $60 from $48.
  • Citigroup downgraded to it to Neutral from Buy but raised its target to $60 from $55.
  • Cowen reiterated an Outperform rating and raised its target price to $65 from $55.
  • Deutsche Bank reiterated its Buy rating and raised its price target from $65 to $68.
  • JPMorgan reiterated an Overweight rating and raised its price target to $80 from $60.
  • KeyBanc Capital Markets reiterated an Overweight rating and raised its target to $72 from $65.
  • Morgan Stanley reiterated an Overweight rating and raised its target price from $54 to $65.
  • Morningstar maintained a Sell rating, but it raised its fair value estimate to $34 from $31.
  • Stifel reiterated a Buy rating and raised its price target to $95 from $85.
  • Wells Fargo reiterated an Outperform rating and raised its target from $54 to $70.

Shares of Micron were last seen down over 4% at $56.18 on Friday, with a consensus analyst price target of $66.68 and a 52-week range of $26.36 to $63.42.

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