Micron (NASDAQ:MU) has seen its stock tumble by 29% from its June peak, as fears of a potential oversupply in the memory market weigh on investor sentiment.
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With the semiconductor giant set to report its fiscal Q1 (November quarter) earnings this Wednesday (December 18), investors will be hoping for a strong performance and guidance that could solidify Micron’s position as a key AI beneficiary.
But can it deliver? According to Stifel analyst Brian Chin, the answer seems to be a cautious ‘not just yet.’
“We expect F1Q results to largely track our/consensus estimates, reflecting strong QQ and YY growth,” Chin remarked. However, his outlook for the following quarter is less upbeat: “Our F2Q (Feb) estimates reflect modest QQ growth and are below consensus, yet we suspect Micron could guide even more conservatively given seasonal/cyclical headwinds as consumer demand continues to underwhelm.”
As for the numbers, Chin projects FQ1 revenue to come in at $8.70 billion – in line with both consensus and the midpoint of Micron’s guidance. He also forecasts an adjusted EPS of $1.77, slightly above Wall Street’s estimate of $1.76 and within Micron’s guidance range of $1.66 to $1.82.
However, as mentioned above, for FQ2, Chin’s estimates are below the Street’s, expecting revenue of $8.80 billion and adj. EPS of $1.83 vs. $9.00 billion/$1.95.
That said, Chin is in no way a Micron bear, as he actually thinks the quarter will only be a blip on the road to better things, viewing it as a “mid-cycle correction, in which Micron can sustain strong margins/ profitability.”
The analyst’s optimism is down to recent checks showing stricter supply-control measures being implemented or planned in the NAND market. Chin notes of hearing that Kioxia is already reducing utilization by 10-20% in Q4, and, more notably, that the industry’s largest supplier Samsung intends to undersupply the NAND market in 2025 and slash its capacity by over 10%.
“We view these as positive supply containment measures and rational actions that could help to stabilize/improve the market from Q2 onward,” Chin said.
Additionally, Micron appears to be progressing ahead of schedule in expanding HBM capacity and improving yields, with Chin viewing “Samsung pain (already delayed qualification with NVIDIA) as further Micron gain.” Chin also thinks Micron’s qualification of its 8-Hi HBM3E on Nvidia’s H200 positions it strongly for 8-Hi adoption on its Blackwell architecture, with 12-Hi expected to follow.
“We model ~$2.5B in HBM revenue in Micron’s FY25, which we think is conservative,” the analyst went on to say.
To this end, Chin assigns a Buy rating to Micron stock, backing it with a $135 price target, implying a potential 24% upside over the next 12 months. (To watch Chin’s track record, click here)
The Street’s average price target is even more bullish; at $153.05, the figure suggests shares will climb 40% higher in the year ahead. All told, based on a mix of 23 Buys vs. 1 Hold, the analyst consensus rates the stock a Strong Buy. (See Micron stock forecast)
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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.
