Why Micron Stock Is One To Watch

Can Micron deliver strong Q1 results and win Wall Street back?


Like many tech stocks this quarter, Micron stock (NASDAQ: MU) has fallen off the radar for many Wall Street analysts. MU share price has fallen over 40% from its 12-month highs. The declines that Micron technology stock price has been experiencing can be attributed to challenges that the wider memory chip industry is facing. Micron will be reporting its Q1 results on Tuesday. To win back Wall Street, Micron will need to improve from its Q3 results. The downturn that Micron faces is not just down to its own performance, but more relating to the memory chip industry as a whole.

Micron Q4 Analysis

Micron OutlookQ4 2018YOYAnalyst Estimate
Revenue$8.44 billion+37.5%+$190 million
Earnings per share (non-GAAP)$3.53+74.8%+$0.19

In Q4, we saw Micron beat out analyst earnings and revenue estimates last quarter. DRAM chips still have a strong demand and pricing, which is keeping Micron’s margins steady.

Year-over-year we have seen DRAM chop sales volume increase by almost 20%. However, NAND chips did not perform so well, the average selling price fell by nearly 25%, but NAND sales volume was sup significantly, by almost 60%.

These strong results were follow with other metrics which were not so attractive. Micron’s Q1 revenue is set to be around $7.9 billion, which is down from Q4 but up year-over-year. Earnings per share is also set to decline from Q4. To finish off the bad news, Micron is forecasted to see declines in its growth margin from Q4. These metrics will have investors worried for the short-term future of the company and we may se slight selloffs. We expect to see Micron stock price reach $60.00 in the next 12-months.

Micron has announced that it will no longer be reporting its gross margin stats for DRAM and NAND chips. This news comes as margins start to move in the wrong direction for Micron. The lack of transparency is likely to lower investor confidence.

To conclude, analysts are lowering their Q1 expectations for Micron as it fell short on its guidance. Micron stock does look cheap when considering its earnings, although if prices slide like we expect them to then earnings won’t remain high. Once Q2 comes, it will be clearer to see what direction Micron stock is taking and the long-term outlook of the company.

On a positive note, Micron has a strong balance sheet, which gives the company support for when it encounters a downturn. Not to mention, the emergence of 5G, artificial intelligence and IoT is likely to boost demand in memory chips.

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