Micron Technology Inc. (Nasdaq: MU) stock jumped 7 percent Wednesday morning after the semiconductor giant reported fiscal fourth-quarter earnings and revenue that topped market expectations. Micron also issued first-quarter guidance that beat analyst forecasts.
Micron reported earnings per share of $2.02 on revenue of $6.14 billion. Both numbers exceeded consensus analyst expectations of $1.83 and $5.86 billion, respectively.
For the next quarter, the chipmaker expects EPS of $2.09 to $2.23 on revenue ranging between $6.10 billion and $6.50 billion. Wall Street analysts were expecting EPS of $1.85 on $6.06 billion in revenue.
Micron and other semiconductor stocks have been on fire in 2017, as high-growth businesses such as artificial intelligence, cryptocurrency mining and online gaming have created a boom for memory products and processors. Micron stock is now up more than 64 percent year-to-date.
“We expect healthy industry fundamentals to continue into 2018, supported by increasingly diverse end markets and applications,” CEO Sanjay Mehrotra says.
Morgan Stanley analyst Joseph Moore says Micron stock has plenty of upside remaining for investors with a high tolerance for near-term volatility.
“We see the stock above intrinsic base case value, but the longer this earnings level persists, the higher our through-cycle earnings estimates are going,” Moore says. “We still see Micron stock trading higher as earnings continue to improve.”
Moore says the near-term risk that investors face is that shortages coupled with elevated prices will drive semiconductor companies to increase capital spending and ultimately oversupply the market. Moore says this dynamic has played out in every major semiconductor cycle in history, but there are no signs of an imminent turning point in the current cycle.
Morgan Stanley projects dynamic random-access memory pricing will remain elevated throughout 2018, boosting Micron’s margins. Moore says…
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