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Q1 Preview: Despite Concerning Environment, Some Analysts Optimistic on Micron (MU) Results

Shares of Micron Technology ( MU ) are trading down 4 percent on the day as the company is expected to announce its first-quarter fiscal 2012 results Wednesday, December 21st following the closing bell. The company has a conference call scheduled at 4:30pm ET. Dial-in: 973-890-8355; Passcode: 37217947.

The Street sees Micron Technology reporting a quarterly loss of $0.07 per share on $2.14 billion in sales. During the first quarter of fiscal 2011, Micron Technology reported earnings of $0.15 per share on $2.25 billion in total sales. For the full year 2011, the analyst consensus is at $0.06 per share in earnings on $8.84 billion in total sales.

18 analyst firms rate Micron Technology shares at Buy, nine rate the stock a Hold, and two suggest to sell the stock. The average price target on shares of MU is $9; targets range from $5.30 to $12.

Going into the release and conference call, analysts at Goldman Sachs are encouraging investors to continue to stay away from the stock amid continued oversupply in DRAM likely leading to larger-than-expected operating losses for the quarter. On December 18th, the firm reiterated its Neutral rating on shares and lowered its earnings estimate for the quarter from a loss of $0.02 per share to a loss of $0.14 per share.

The firm is estimating roughly 13 percent oversupply in DRAM and a slight oversupply of NAND in the first quarter will lead to price erosion down the road. For the fiscal year, Goldman is predicting breakeven earnings.

"We believe it may take additional supply cuts plus a recovery in PC unit demand before DRAM is likely to return to balance. Although Micron is executing well in NAND, we continue to favor SanDisk over Micron given its pure-play exposure to NAND flash," according to Goldman.

Analysts at Wells Fargo slashed estimates dramatically following the release of Intel's (Nasdaq: INTC) new guidance. The firm still sees the PC segment as the strongest among the various chip makers and continues to favor Intel over the rest. At this time, Wells Fargo has an Overweight rating on shares of MU with a $5.30 price target.

The firm said market checks are indicating minimal change in Micron's contract prices for DRAM and NAND in the months of October and November, while DRAMexchange data suggests both contract and spot prices fell during the two months. Back on December 13th, Wells Fargo cut its first quarter and fiscal 2012 per share estimates from a loss of $0.02 and $0.13 to a loss of $0.24 and a loss of $0.42, respectively.

An analyst at Wells Fargo said, "Over the last few years Micron has successfully diversified beyond commodity DRAM to establish substantial businesses in specialty DRAM, NAND flash, NOR flash and image sensors which we think could help improve profit stability somewhat. We believe that solid growth in the computer space will drive DRAM growth over the next several years. We view NAND flash as a segment that has high growth potential given the many new applications that NAND flash is used for."

Wedbush maintains a Neutral rating and $7 price target on shares of Micron Tech as the firm is beginning to anticipate a turnaround in the PC DRAM market. The firm still believes this quarter will be terrible, expecting a loss of $0.14 per share on $2.128 billion in sales. Still, Wedbush remains encouraged after 2Gb DDR3 commodity PC contract ASP's fell by roughly just of 25 percent during the course of the quarter.

An analyst at Wedbush believe the Street's fiscal 2012 estimates are well over estimated given the current DRAM and macro environment. For the fiscal year, the firm is forecasting a earnings loss of $0.18 per share on $8.71 billion in sales.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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