Why Micron can nonetheless ‘shine’ regardless of its downbeat earnings forecast

Even after delivering a November forecast that was significantly decrease than analysts have been anticipating, Micron Expertise Inc. is “setting up as a name to own into 2022,” within the view of 1 analyst.

Shares of Micron

are off about 1% in Wednesday morning buying and selling following the downbeat outlook, however a number of analysts got here out of Micron’s newest earnings report with optimistic takes on what lies forward as soon as the memory-chip firm will get previous short-term points within the personal-computer market. Micron Chief Government Sanjay Mehrotra flagged that some PC makers have been adjusting their reminiscence and storage purchases given shortages of different parts, however the firm nonetheless expects “record revenue with solid profitability” within the present fiscal yr that simply started.

“Big picture, all 3 DRAM makers are willing to build inventory and contemplate slowing [capital expenditures], which gives us confidence that this correction will be short-lived and that [supply/demand] will be in balance or tight throughout all of CY22,” wrote Evercore ISI’s C.J. Muse, the analyst who preferred Micron’s prospects heading into 2022.

Muse argued that traders will come to favor “names where excess inventory is more easily understood” and the place corporations have allowed for a “reset” of consensus estimates. “In this environment, look for Micron to shine,” he wrote, whereas sustaining an outperform ranking and $100 value goal on Micron’s inventory.

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Raymond James analyst Chris Caso took an identical view. “Our take is that if the slowdown remains constrained to PC—and if PC doesn’t get worse—we think the DRAM industry can maintain a healthy supply/demand balance,” he wrote. “Given the pullback in the stock, we think that creates a favorable risk/reward,” with Micron shares buying and selling at 7.5 instances his new earnings-per-share estimates for fiscal 2022.

Caso has a powerful purchase ranking and $100 goal value on the shares.

Rosenblatt Securities analyst Hans Mosesmann wrote that there continues to be “unusually strong demand” for PCs, such that the PC market will “likely see unseasonal trends in 1H22” as a consequence of a excessive variety of unfulfilled orders.

“The bear case of PC DRAM prices leading to an overall end of cycle collapse either did not play out or Micron did not get the memo,” he wrote, whereas reiterating a purchase ranking and Avenue-high $165 value goal on the shares. “Margins would be collapsing and inventories bloating; they are not.”

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Cowen & Co. analyst Karl Ackerman known as the corporate’s steering reset “the right medicine required for many on the sidelines,” although he famous that “there are a couple unknowns entering the first half that may not yet fully dispel the bear case.” He saved an outperform ranking on the shares and lowered his value goal to $80 from $90.

“We could see how some investors might construe the inventory build as a measure to support the company’s pricing strategy,” Ackerman wrote. “Even if this were the case, one could argue MU certainly could hold on to inventory a bit longer given new server platforms in F22 should soak up any excess DRAM bits in stock.”

Micron shares have misplaced 12% over the previous three months, the identical time wherein the S&P 500

has risen 2%.

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