Micron (MU) is the first chipmaker to report quarterly results this earnings season. Its report, due after the market opens on Wednesday, will provide insight into how the semiconductor sector is faring amid high expectations on Wall Street.
Micron’s memory chip business has seen a resurgence over the past year as big tech companies pour billions into the semiconductor sector to acquire hardware to power artificial intelligence data centers.
Micron sets itself apart by partnering with industry superpower Nvidia (NVDA), rather than competing with it. Micron supplies memory chips for Nvidia’s GPUs, which are in high demand.
Wall Street expects Micron to report quarterly revenue up 90% from a year ago, after analysts slightly lowered their expectations by 0.3% from last month. Here’s a breakdown of analysts’ forecasts, according to Bloomberg consensus estimates:
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Revenue: $7.66 billion (Micron forecast: $7.4-$7.8 billion) vs. $4.01 billion in Q4 2023
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Adjusted earnings per share: $1.11 (Micron forecast: $1 to $1.16) vs. a loss of $1.07 in Q4 2023
Shares of the chipmaker rose as much as 2% in trading on Wednesday.
Investors have astonishingly high and increasingly demanding standards for AI chipmakers, which has often left them disappointed in recent months. Micron’s third-quarter results beat expectations and did not influence investors much in late June.
Instead, the stock plunged on its fourth-quarter outlook, which matched Wall Street expectations (rather than beating them). Nvidia stock also sank after reporting its quarterly earnings in late August. Despite more than doubling profits and beating sales forecasts, investors wanted more from the semiconductor superpower. Nvidia has since recovered, but Micron stock is down more than 30% from three months ago.
Nearly 93% of Wall Street analysts covering Micron recommend buying the stock. On average, they think its shares will rise more than 50% over the next year to $143.94. Still, their views on Micron are mixed.
Morgan Stanley’s Joseph Moore thinks more subdued Wall Street expectations could help boost the stock after earnings. “MU stock could rebound on earnings given low near-term expectations, particularly if enthusiasm returns to AI beneficiaries,” he wrote in a note to investors earlier this week. But Moore maintained his Equal Weight rating on Micron and sees the stock as “fundamentally overpriced.”
JPMorgan, on the other hand, maintained its Overweight rating on the stock and said it “remains one of our top picks in the semifinals next year.”
The PHLX Semiconductor Sector Index (^SOX) has begun to recover from a dip earlier in the month as tech stocks rallied following the U.S. Federal Reserve’s massive interest rate cut and the Chinese central bank’s expansive stimulus package. The index is up nearly 6% over the past week. Micron has been part of that trend, rising nearly 10% over that time period.
The company also stands to benefit from a bill awaiting President Joe Biden’s signature that would relax environmental requirements for microchip projects funded by the CHIPS and Science Act. Micron is one of the largest recipients of CHIPS Act funding, and the Building Chips in America Act passed by the U.S. House of Representatives on Monday would allow the company faster access to more than $6 billion in federal grants for its microchip plants planned for Idaho and New York.
Laura Bratton is a reporter for Yahoo Finance.
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