What To Expect In Micron Technology's Q3 Print

Credit Suisse expects Micron Technology, Inc. MU to come close to meeting its third-quarter outlook when it reports earnings on June 30.

Expectations Ahead Of Earnings

"We expect MU to roughly meet F3Q Rev/EPS guidance and expect F4Q guidance to confirm a F3Q bottom as 20nm DRAM ramps albeit absolute F4Q Rev/EPS will likely miss Street and more recent bullish expectations," analyst John Pitzer wrote in a note.

Pitzer sees third-quarter revenue/EPS of $2.94 billion/($0.09) versus the mid-point of the company's guidance range for revenue of $2.80 billion–$3.10 billion and EPS of ($0.12)–($0.05) on slightly weaker than expected DRAM pricing. The Street expects loss of $0.09 and revenue of $2.96 billion.

"While MU will benefit from the improvement in market conditions for NAND, we expect that benefit may be limited as only 20–30 percent of the overall NAND will be sold in the channel where supply may be tight and most of the 3D NAND is locked in for Intel and MU's own SSDs," the analyst highlighted.

Related Link: Micron Approaches $14 For First Time Since January

The analyst, who has an Outperform rating on the stock, also noted that about 50 percent of second half incremental Micron's 3D NAND capacity is allocated to Intel on a "cost-plus" basis.

Pitzer expressed concerns over continued decline in Mobile/Server DRAM ASPs even as PC DRAM pricing stabilizes.

Looking To Q4 And Beyond

For the fourth quarter, the analyst expects Micron to guide revenue/EPS to $2.95 billion–3.25 billion and ($0.05)-$0.00 with revenue/EPS mid-point of $3.10 billion/($0.03), below CS at $3.15 billion/$0.00 and Street at $3.20 billion/$0.04.

Looking out in CY17, Pitzer sees a "much more constructive stock narrative" driven by recent supply cuts in DRAM which could put CY17 bit growth at 15–20 percent versus 20–25 percent in CY16. The analyst expects CY17 EPS of $1.50 versus Street of $1.09.

The analyst expects a better than expected cost position in 2017 at 3D NAND and better product mix — NAND increases to 40–45 percent from 30–35 percent of revenue, more Enterprise SSD, Mobile NAND and Mobile DRAM.

At time of writing, Micron Tech was up 4.46 percent on the day, trading at $12.77. Pitzer has a price target of $20.

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Posted In: Analyst ColorEarningsLong IdeasNewsPrice TargetPreviewsReiterationAnalyst RatingsMoversTechTrading IdeasCredit SuisseJohn Pitzer
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