Micron (NASDAQ:MU) headed into its latest earnings report with fears surrounding a weak DRAM market and memory oversupply. However, thanks to data centers’ ongoing AI-related demands, those concerns proved to be misplaced.
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The memory giant’s stock surged nearly 15% on Thursday, following an earnings report that exceeded expectations and included a strong outlook.
In the fiscal fourth quarter (August quarter), revenues rose by 93.3% year-over-year, reaching $7.75 billion and edging ahead of the Street’s call by $100 million. Likewise, for the bottom-line, adj. EPS of $1.18 trumped analyst expectations by $0.07.
The company’s adjusted gross margin stood at 36.5%, surpassing Wall Street’s target of 34.7%. And there’s more positive news ahead: driven by improved pricing and product mix, Micron expects its adjusted gross margin for the November quarter to range between 38.5% and 40.5%.
Guidance came in strong, too. For fiscal Q1, Micron anticipates revenue at the midpoint to hit $8.70 billion, ahead of the $8.40 billion consensus. Adjusted EPS is expected to range between $1.66 and $1.82, beating the Street’s estimate of $1.61.
While some analysts’ conviction wavered as the results neared, that was certainly not the case for Rosenblatt’s Hans Mosesmann, who ranks 5th amongst the thousands of Wall Street stock pros. The 5-star analyst remained resolutely bullish, but nevertheless was still taken aback by the strength of the print.
“Micron’s unambiguous beat and raise last night surprised even us as uber Bulls of the MOAC (mother of all cycles) AI-driven cycle,” Mosesmann said. “Near-term smartphone/PC inventory weakness was trumped by big data center strength (AI and gen purpose), HBM mix, high-density DIMMS, and high-end SSDs. For months now, the Street has been lulled into the notion of an emerging vanilla down cycle (inventories in smartphones/PCs) while studiously avoiding the new, once-in-a-generation HBM dynamic and its disruptive impact on supply/demand on the 3-to-1 wafer trade ratio compared to commodity DRAM.”
Mosesmann continues to view Micron as a ‘top pick for 2024,’ raising his price target to a new Street-high of $250. This suggests a potential upside of a hefty 129% from current levels. (To watch Mosesmann’s track record, click here)
Most other Street analysts also remain Micron bulls. Based on 24 Buys vs. 1 Hold and Sell, each, the stock claims a Strong Buy consensus rating. At $151.54, the average price target factors in one-year returns of ~38%. (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.
