Micron Technology, Inc. (NASDAQ:MU) is expected to hand down strong guidance when it reports its fiscal first quarter financial results on Wednesday, December 20, 2023, analysts at UBS believe.
Ahead of Micron’s report, the analysts awarded the stock a ‘Buy’ rating and raised their price target from US$76 to US$90.
Micron shares traded hands at US$78 on Tuesday afternoon.
The UBS analysts attributed their boosted price target to higher estimates and a raised price to tangible book value per share (P/TBV). They argue that Micron has peaked in the last two cycles at more than two times P/TBV and TBV is projected at about $47 by the end of the 2025 calendar year.
For 1Q, the analysts now expect a loss per share of $1 on revenue of $4.69 billion, compared to Wall Street estimates of a loss of $1.01 on revenue of $4.52 billion.
For fiscal 2Q, the analysts expect Micron to guide revenue of $5.25 billion, compared to the Street estimate of $4.9 billion, and gross margins up to 10% from breakeven in fiscal 1Q.
“This is driven by a low double-digit quarter-over-quarter improvement in pricing, modest bit growth, and better cost downs than the company has experienced over the past few quarters,” they wrote.
“We expect production to remain about flat which should bring inventory down further and see customers on the smartphone side in particular restocking inventory ahead of new product launches and coming off about eight weeks inventory on average.”
The analysts wrote that while they still see Micron burning through cash in 2Q, they see earnings per share (EPS) topping $1.25 by 4Q in August 2024.
“On top of continued pricing momentum in 2Q, gross margins should benefit from a further moderation in underutilization charges as nameplate capacity starts to come down more significantly due to the ramp in DDR5/HMB3e - both of which will consume significant wafer capacity that will not come close to being offset by new capacity adds starting next year,” they wrote.