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Micron (MU) Earnings Preview

by | Dec 19, 2021

Micron (MU) reporting earnings on Monday after the close with the Street looking for $2.11 on $7.67B in sales. Next quarter is guided to $1.86 and $7.27B while the FY is at $8.79 and $31.89B, a 15% increase Y/Y. Shares have closed lower in four of the last five quarters with an average closing move of 4.8% and a max move of 7.39%. The current implied move is 6.65% which is a big higher than the average. MU shares are flagging around the 21-EMA and the top of December value with a breakout above $86 in focus for a run to $92-$95 and back near the March highs. The $92.3B company trades 7.65X earnings, 3.33X sales, and 10.7X cash. MU is positioned well as the last remaining pure-play US memory vendor with both DRAM and NAND production and tailwinds from secular bull markets in cloud computing, 5G, and automotive growth. They’ve struggled with component shortages in 2021 around the PC and mobile markets this year which had hurt pricing overall but a reacceleration in 2022 could set up a significant re-rating for shares.  Analysts have an average target for shares of $99 with a Street High $172. Lynx raising their target to $105 from $67 on 12/17 following channel checks that lead the analyst to believe that the Street is likely in for a positive surprise when Micron next reports earnings. Between low inventory at memory suppliers like Micron and low inventory at memory consumers such as HP Inc. (HPQ), the memory market could be in a healthier environment than the Street expects and the firm forecasts upside to consensus expectations in the February-end quarter. UBS raising their target to $99 from $90 on 12/13 and anticipates the company’s results and guidance to be biased higher amid early signs of improvement in Q4 DRAM contract pricing, which the firm believes can be sustained into Q1 and the summer of 2022. Citi positive on 12/7 after TrendForce raised its DRAM price forecast for the first time in six months due to better-than-expected notebook demand lowering DRAM inventory. The analyst sees positive catalysts for DRAM such as this one and believes there are more to come due to lower inventory and improving server demand in the coming months. Hedge fund ownership fell 5% last quarter. Sanders Capital adding another 3.5M shares. Short interest is 2.15%. Options flow has been mixed with buyers recently in the February $90, $95, and $100 calls while the June $120 calls with sellers.

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