Micron reports fiscal fourth-quarter results after the closing bell Tuesday.
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Micron Technology stock has barely moved this year, giving investors little reason to get excited about the memory maker. But that might change Tuesday when the company reports earnings.
Micron (ticker: MU) is set to report fiscal fourth-quarter results after the closing bell. The consensus estimate is adjusted earnings of $2.33 a share on revenue of $8.22 billion. Micron has issued guidance for earnings of $2.20 to $2.40 a share, and revenue of $8 billion to $8.4 billion, according to FactSet. In the year-ago quarter, Micron reported an adjusted profit of $1.08 a share on revenue of $6.06 billion.
Citi Research analyst Christopher Danely expects Micron to report earnings that are in line with consensus estimates, and that executives will issue guidance that comes in below fiscal first-quarter forecasts. He’s bullish on the company, reiterating a Buy rating on the stock.
But he projects the memory the company makes will get 5% to 10% cheaper in the fourth quarter, and 10% cheaper early next year. That dip is likely a short-term issue, he wrote in a note published Monday. Danely expects memory pricing to drop as much as 10% through the first quarter in 2022, and recover that 10% in the second half of next year.
Such a dip in prices would be mostly the result of the market for personal computers, which makes up roughly 20% of the overall demand for dynamic random access memory. Danely said demand for memory for PCs will dry up, and inventory at hyper-scale data center companies will remain high.
As a result of lower prices for memory, Danely cut his estimates for 2022 revenue to $32.50 billion, and earnings to $8.82 a share. The consensus among analysts tracked by FactSet is for earnings of $10.87 a share for fiscal 2022 on revenue of $36.25 billion. Danely said the worst memory price drops will occur in the first three months of 2022, and the company’s gross margins will bottom out at roughly 40%. Analysts expect gross margins of 47% for the fourth quarter.
Danely predicted that the company will cut capital spending soon too, as a result of memory pricing drop, suggesting that it would do so early next year.
Of the analysts who cover Micron, 88% rate shares a Buy, and 13% have a Hold rating on the stock. There are no sell ratings on Micron, according to FactSet. The average target price is $110.10, which implies an upside of 47%.
Shares of Micron advanced 1.5% to $75.40 in Monday trading. The stock has been flat this year, as the PHLX Semiconductor index, or SOX, rose 23%.
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