Micron Technology, Inc. (MU): Can MU Stock Continue The Bull Run?

Numbers To Look Out For

Earlier, the improving market fundamentals had allowed Micron to revise its Q1 guidance on the upside. When Micron had reported its Q4 2016 earnings, it had guided for first-quarter revenue to come in between $3.55 billion and $3.85 billion, with non-GAAP EPS between $0.13 and $0.21. This represented a revenue growth of around 10%, below the market’s expectation. However, the improving DRAM pricing allowed the company to revise its guidance on the upside. The company recently guided for a revenue of $3.975 billion, along with non-GAAP EPS of $0.28.

The revised guidance are considerably above the higher end of the previous guidance and represents a revenue growth of 18% YoY. The company also expects its Non-GAAP gross margin to come in around 25.5%, with a range of +/- 0.5%. The guidance is also in line with analysts estimates. The company has reported earnings beat in its previous four quarters and is likely to do the same in this quarter. (Also Read: 3 Reasons Why Micron Technology, Inc. (MU) Stock Is Still A Buy Going Into 2017)

Micron Stock Is A Buy On After Earnings Pull Back

Micron Technology, Inc. (NASDAQ:MU) is likely to post a strong guidance for the next quarter following the Inotera deal which Micron completed recently. The acquisition is expected to be EPS and FCF accretive from the start. The deal will also help Micron reduce the cost of production. Micron expects the cost of both NAND and DRAM to decline by 20%. So Micron is caught in a sweet spot of declining costs and rising prices, resulting in a strong margin expansion.

Micron stock is currently in a bull market gaining more than 60% in last six months. The rally in the stock price was supported by improving fundamentals and pricing power. The rising demand and supply constraints will help Micron post a strong growth and expand its margins. The recent analysts’ upgrades indicate that Micron stock has an upside of 20%-50%. Investors should buy the stock on any after earnings pullback.

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Additional Links:

(1) http://marketrealist.com/2016/12/will-microns-revenue-rebound-fiscal-1q17/

(2) http://www.cnbc.com/2016/12/07/micron-to-rally-more-than-50-percent-citi-says.html

(3) https://www.benzinga.com/analyst-ratings/analyst-color/16/12/8820322/microns-momentum-intact-as-q1-report-approaches