JPMorgan Weighs In On An Improving Semiconductor Industry And Micron

Micron Technology, Inc. MU reported in-line F3Q16 results, and announced weaker-than-expected guidance. Despite guidance reflecting the lack of an upturn in financials in the August quarter, improved industry semiconductor fundamentals would likely support the stock till the company’s financial performance improves in FY17, JPMorgan’s Harlan Sur said in a report.

Analyst Harlan Sur maintained an Overweight rating on the company, with a price target of $15.

Micron reported its F3Q16 revenue and EPS at $2.90B and ($0.08), near the midpoint of guidance. DRAM revenues grew 9 percent sequentially, with healthy bit growth being offset by lower ASPs. NAND revenues declined 15 percent sequentially, with both bit growth and ASPs down. Micron was able to partially offset weak pricing by reducing costs, leading to gross margin of 17.2 percent, down 250bps sequentially.

F4Q16 Guidance

Although the pricing environment has improved recently, the August quarter guidance does not reflect this, Sur mentioned.
Revenue guidance of $2.9-$3.2B fell short of consensus estimates of $3.21B. GM guidance of 15.5-18.0 percent was also below consensus of 20.8 percent, “reflecting a pricing environment that is weaker than improved spot pricing would indicate and improvements that are lagging bit supply growth by around one quarter,” the analyst wrote.

Both DRAM and NAND bit shipment growth is expected to accelerate in the quarter, Sur added.