Shares of Memory chip specialist Micron (MU) trended downwards on Wednesday following the release of the company’s FQ4 results.
Micron reported revenue of $6.06 billion, a 24% year-over-year increase and coming in ahead of the estimates by $170 million. Non-GAAP (adjusted) net profit almost doubled from the same quarter last year to clock in just under $1.23 billion, resulting in Non-GAAP EPS of $1.08, above consensus estimates by $0.11.
So far, so good. What investors did not like, however, was Micron’s forecast of what’s to come next. For the November quarter, Micron anticipates revenue of $5.2 billion, just under consensus calls for $5.3 billion, while the company’s forecast for non-GAAP EPS of $0.47 at the mid-point is also well below the Street’s $0.68 estimate.
Soft near-term gross margins on heightened NAND mix and several DRAM ramps along with the loss of Huawei revenue (which amounted to almost 10% of sales in the quarter) are weighing heavily on investors’ minds. Micron expects the impact of halted shipments to the Chinese telecom giant to be offset by the close of F2Q21.
Despite Wall Street’s lukewarm reception, Rosenblatt analyst Hans Mosemann calls the November quarter guide “mixed but better than feared.”
While the short-term outlook is weakened by reduced enterprise demand, lower IT spending and certain customers’ higher inventories, the 5-star analyst remains bullish on Micron’s long-term prospects.
Mosesmann commented, “Looking into Micron's end markets, the company has started to see certain end market recoveries, including Smartphones, Automotive, and Consumer. Cloud and Notebook demand continues to be healthy, on the heels of work from home and shop from home trends, as well as Gaming demand... We think the setup for Micron for investors looking into 2021/22 is for a memory cycle driven by traditional S/D dynamics, Micron’s new DRAM 1Z and 1- alpha ramps, and 2nd generation RG NAND ramps.”
Overall, Mosesmann reiterates a Buy rating on MU shares along with a $100 price target. Investors are looking at returns of a strong 113%, should Mosesmann’s thesis play out over the coming months. (To watch Mosesmann’s track record, click here)
Mosesmann is Wall Street’s most prominent Micron bull, but how does the memory giant fare amongst his colleagues? Based on 14 Buys, 4 Holds and 1 Sell, the stock has a Moderate Buy consensus rating. There’s possible upside of 29%, should the $60.78 average price target be met over the next 12 months. (See Micron stock analysis on TipRanks)
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