Micron Gains: After a quarter of debate, how bad was the memory market?

Micron Technology Inc. will provide investors with a better understanding of the memory chip market this week, after a quarter of dueling stories that chip prices will be kept in chip prices.

Micron

MU, + 4.02%

should release its fourth quarter financial results after Thursday's bell.

Micron has begun its fourth fiscal quarter literally at a high level, with last year's optimistic forecasts having sent the title to its highest level in 18 years. Many optimists have argued that the traditional cycle of memory chips was no longer applicable and that the market had become unknown due to the new demand for devices connected to the Internet outside of phones and phones. an insatiable demand for growing data centers.

The stock then experienced turbulence in early July when Micron appeared to be the victim of a trade war with China after a Chinese court blocked the sale of some of its products. But optimism was still evident in announcements like the end of August, when the company announced it would invest $ 3 billion in its Manassas, Virginia plant over the next decade.

Things began to spoil for Micron when the company confirmed early September what others feared: a rebound in demand for memory chips and prices in the second half of 2018 would be weaker than expected.

Cowen analyst Karl Ackerman said the sentiment before the results is "terrible," but JP Morgan analyst Harlan Sur said he sees "a significant increase" in action despite the bearish feeling. Ackerman and Sur both have an overweight position in Micron.

Earnings: Of the 27 analysts surveyed by FactSet, Micron is expected to average adjusted earnings of $ 3.33 per share, up from $ 3.14 per share expected at the beginning of the quarter, before Micron predicts between 3.23 and 3.37. dollars per share. Estimize, a software platform that leverages crowdsourcing from hedge fund executives, brokerages, purchasing analysts and others, requires a profit of $ 3.35 per share.

Returned: Wall Street expects Micron to make a $ 8.25 billion business, according to 27 analysts surveyed by FactSet. That's $ 7.98 billion at the beginning of the quarter, before Micron forecasts revenues of $ 8 billion to $ 8.4 billion. Estimate forecasts revenues of $ 8.28 billion.

Analysts predict that sales of DRAM, or dynamic random access memory, the type of memory commonly used on PCs and servers, will increase by 46% to $ 5.92 billion. Wall Street expects an 18% increase to $ 2.19 billion sales of NAND chips, flash memory chips used in USB drives and smaller peripherals such as digital cameras.

Movement of stock: The Micron share reached its highest level in 18 years, or $ 64.66, just before the start of the fourth fiscal quarter, its highest level since September 21, 2000, when it traded at 65.81. dollars. Stocks dropped to $ 58.95, or 10% over the next three weeks, resulting in third quarter financial results, and have since declined by almost 23% since the last report. In comparison, the S & P 500 index

SPX, + 0.54%

gained 5.1%, the Nasdaq composite index

COMP + 0.76%

rose 2.4% and the PHLX Semiconductor Index

SOX, + 0.84%

has decreased by 1.8% since Micron's last earnings report.

What the analysts say: Analyst Baird Tristan Gerra, who outperformed Micron, said DRAM prices peaked in the third quarter, adding that the glut of NAND had worsened and is unlikely to stabilize until the second half of 2019.

Ruben Roy, an analyst at MKM Partners, who bought Micron, said the reward risk favored investors over the longer term, believing that estimates of a 14% decline in NAND demand in fiscal year 2019 "Seem optimistic".

"We believe that overall DRAM demand trends remain largely positive with the ever-strong demand trends related to data center and cloud markets as the memory intensity continues to increase," noted Roy.

RBC Capital analyst Amit Daryanani, who outperformed, said he expects Micron to benefit from the recent downgrade.

"We believe that MU has the potential to be aggressive with buyouts at these price levels and surprise us positively at the BPA level," said Daryanani. "We remain optimistic about MU and believe that this company has levers outside the headwinds of memory (mix of portfolios and redemptions), which should help the underlying EPS."

Of the 33 analysts who cover Micron, 24 have buy or overweight ratings, 9 have holding ratings and no one has a sale or underweight rating. Following a wave of price declines by only 10 analysts in September alone, the average price target of $ 76.04 was achieved.

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