by Ian Harvey
March 27, 2020
Micron Technology stock has a leading position in the memory and storage industry, with strong secular tailwinds to its back.
And despite the business disruptions caused by the coronavirus outbreak, Micron reported stronger-than-anticipated results for second-quarter fiscal 2020 on March 25.
And Members of Stock Options Made Easy “Earnings Predictions” made 140% potential profit using a CALL OPTION.
Where to now?
An option call trade, based on earnings of Micron Technology stock, was recommended to Stock Options Made Easy “Earnings Prediction Members” on Monday, March 23, 2020 and an article entitled “Micron Technology Earnings and the Way Forward!” was made available to all.
Micron Technology stock reported second-quarter fiscal 2020 on Wednesday, March 25, 2020, after the market closed, and despite the business disruptions caused by the coronavirus outbreak, MU reported stronger-than-anticipated results.
The company’s fiscal second-quarter non-GAAP earnings per share of 45 cents beat the Consensus Estimate by 18.4% and surpassed its guided range of 35 cents (+/- 6 cents) as well.
Also, quarterly revenues of $4.8 billion outpaced the consensus mark of $4.6 billion. The memory chip maker’s revenues also came in line with the higher-end of management’s guided range of $4.5-$4.8 billion.
Now, Micron Technology stock sees solid third-quarter revenue as the need to work from home due to the coronavirus outbreak restrictions is boosting demand for data center and notebook services.
The chipmaker forecasts third-quarter revenue to be in the range of $4.6 billion to $5.2 billion, and gross margin to be in the range of 31%, plus or minus 150 basis points.
“Micron delivered solid second quarter results and revenue at the high end of the guidance range, despite the unfolding COVID-19 pandemic,” said Micron Technology President and CEO Sanjay Mehrotra. “We will emerge from this challenging time well-positioned to capture the robust long-term demand opportunities for memory and storage.”
Mehrotra said data center business in China was boosted by increased gaming, e-commerce and remote-work activities as the country locked down many cities and regions to combat the outbreak.
The company is moving supply from smartphone to service the strength in data center markets, Mehrotra said, adding the demand could lead to supply shortages.
Analysts Are Upbeat.....
Wall Street analysts are upbeat on Micron Technology stock. Out of the 19 analysts covering Micron’s shares, 17 have a Buy rating, 1 has a Hold rating, and 1 has a Sell rating, adding up to a Strong Buy consensus rating. The average price target of $67.64 provides investors with a potential 59% gain in the stock in the coming 12 months.
Here are some of the analysts’ movements towards Micron Technology stock.....
Bank of America provided a double upgrade to Buy from Underperform (PT Affirmed at $60).
JPMorgan maintained an Overweight Rating (PT $65)
"While the full impact of Covid-19, especially on the back half of the year, is not clear, we expect the demand environment to be mixed with continued strength in cloud data center and gaming offset by weaker trends in consumer products such as PCs, smartphones, and autos, at least in the near term," analyst Harlan Sur wrote.
Webush maintains an Outperform Rating (PT Raised to $65 from $51)
"While we are still positive on Micron, the future has become more opaque.....we expect pricing will be better than we have modeled, allowing MU to exceed our estimates," analyst Matt Bryson wrote.
Deutsche Bank affirms Buy Rating (Lowers PT to $60 from $65)
"We have lowered our price target from $65 to $60 to account for potential demand destruction from Covid-19,” wrote analyst Sidney Ho.
Micron was one of the first large U.S. companies to report in the coronavirus environment on Wednesday after the close.
It is led by a very strong management team focused on increasing shareholder returns.
And, right now Micron Technology stock is a terrific bargain opportunity.
In our present work-from-home environment, Micron's customers have increased demand for storage solutions in the cloud, and employees and students have increased their demands for home and enterprise notebooks, hence there is some pull into this quarter's performance.
Demand for storage and memory solutions are only going to increase over time. As consumers and businesses continue to consume content and data, the demand for storage will provide a very long secular tailwind for Micron.
Demand for 5G capable smartphones, servers, cloud, automotive industry, consumer electronics, gaming, and IoT (Internet of Things), are not going to suddenly taper off.
Micron Technology stock derives close to 65% of its total revenue from its DRAM segment. DRAM is faster, denser and more expensive. But given the number of gigabytes per dollar it stores, DRAM becomes fairly inexpensive for companies that require extensive storage solutions.
And, since DRAM is manufactured by just three companies globally, it is still able to command huge premiums.
There is huge potential for to profit from Micron Technology stock going forward!
It is expected that Micron Technology stock will be worth a $90 billion market cap versus $50 billion presently, or at least 60% higher.
The demand for memory in servers, cloud, 5G, machine learning, and autonomous vehicles is only going to increase, it is not going down.
During this downturn, Micron is still expected to be profitable, which is a vastly improved situation compared the last downturn of 2016.
Given a more normalized environment such as it had in 2018-2019, with steady DRAM prices, Micron could return to making $9 billion of free cash flow.
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An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!