Micron Advances As Analysts Applaud Results
The shares of Micron (MU) are climbing after the company reported better than expected first quarter results and provided second quarter guidance that beat expectations. Research firm Needham responded to the results by raising its rating on the stock two notches, to Buy from Underperform. Additionally, a number of other firms increased their price targets on the name.
RESULTS: Micron reported Q2 EPS of 32c, versus a consensus outlook of 28c. The company's revenue came in slightly above expectations. It said that sales volumes of DRAM and NAND, two forms of flash memory, jumped 18% and 26%, respectively versus the previous quarter, while DRAM average selling prices rose 5%.
UPGRADE: Needham analyst Rajvindra Gill raised his rating on Micron two notches, to Buy from Underperform, its equivalent of a Sell rating. The analyst believes that the flash memory sector is returning to its very strong 2014 days, when Micron's gross margins reached 35.8% and the stock jumped to $36.50. Unlike in 2014, DRAM is being used in not just PCs, but also in cloud computing, data centers, networking, graphics and auto/ADAS, Gill noted. Demand for both NAND and DRAM is expected to rise by large amounts next year, added the analyst, who set a $33 price target on the shares.
TARGET INCREASES: JPMorgan analyst Harlan Sur increased his price target on Micron to $28 from $25. DRAM prices were higher than expected and NAND margins appeared to reach a positive turning point as its costs fell and prices rose, Sur believes. Given the disciplined capex of companies in the sector and "multiple demand drivers" for NAND, supply/demand should be "relatively balanced" for both DRAM and NAND over the medium term, Sur believes. He kept an Overweight rating on the stock. Brean Capital analyst Mike Burton also raised his price target on Micron to $28 from $25. Unlike the previous two quarters, when only the company's top line results were "strong," it delivered significantly higher than expected bottom line results last quarter, Burton stated. Micron is benefiting from positive DRAM and NAND trends, and DRAM supply/demand trends should be "favorable through at least 1H17," the analyst believes. He kept a Buy rating on the stock.
WHAT'S NOTABLE: Micron's results indicated that its SSD business is strong, said Craig-Hallum analyst Tony Stoss. Since Micron uses Silicon Motion's (SIMO) controllers in its SSD products, the results are positive for Silicon Motion, the analyst stated. He kept a Buy rating on Silicon Motion.
ANOTHER TO WATCH: Western Digital (WDC) owns SanDisk ,which also markets flash memory products.
PRICE ACTION: In late morning trading, Micron jumped 13.24% to $23.31, Western Digital rose 3.18% to $71.42, and Silicon Motion gained 1.16% to $46.58.
Disclosure: None.