Micron (MU) will be showing off its second fiscal quarter earnings for 2021 tomorrow, and Deutsche Bank analyst Sidney Ho is exceedingly confident ahead of the print.
At the start of the month, Micron boosted its F2Q guidance from the prior revenue and EPS estimates of $5.6 to 6.0 billion and $0.68-0.82, respectively, to $6.20 to 6.25 billion and $0.93-0.98.
Additionally, the company also raised its gross margins forecast from the prior guidance of 30-32% to the 32-33% range. And while FCF may remain negative for the quarter, it is expected to come in better than previously anticipated.
Ho’s F2Q estimates are in line with the revised guidance and call for revenue of $6.24 billion and EPS of $0.96.
“We do not expect meaningful variations from the guidance range,” the 5-star analyst noted. “Based on management commentary, we expect strong results in both DRAM and NAND in the quarter, with DRAM driving more of the upside vs. original guidance on strong pricing and bit growth.”
Looking ahead, Ho thinks that due to the “continued positive market environment in both DRAM and NAND,” there’s a possibility the strength in memory pricing could once again drive sales beyond previous estimates.
“On the DRAM side, management commentary and industry checks suggest that market supply will remain tight, which could drive upside to our expectations for a +5% increase in ASPs (average selling price) q/q,” Ho said.
And while the environment for NAND hasn’t been quite as robust, Ho says industry checks indicate “certain SSD SKUs increasing ASPs by ~5% in C2Q.”
The result of which could be that Ho’s forecast for NAND ASPs to drop by 2% sequentially in F3Q could also end up being on the cautious side.
So what’s the upshot for investors? Ho is sticking to his Buy rating and $110 price target on the stock. Investors could be pocketing gains of 27%, should Ho’s thesis play out accordingly over the coming months. (To watch Ho’s track record, click here)
Is the Street on the same side as the Deutsche Bank analyst? Absolutely. MU’s Strong Buy consensus rating breaks down into 23 Buys and just 3 Holds. The average price target comes in at $115.59, and implies possible upside of ~34%. (See Micron stock analysis on TipRanks)
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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.
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