Micron Technology is set to take center stage as the first major chip manufacturer to unveil its quarterly earnings this reporting season. The announcement, due after the market closes Wednesday, is highly anticipated and will shed light on the health of the semiconductor industry amid bullish sentiments from investors.
In the past year, Micron’s memory chip division has experienced a notable rebound, driven largely by substantial investments from major tech companies seeking hardware to support their burgeoning artificial intelligence (AI) operations. This strategic pivot has positioned Micron favorably, especially as it collaborates with giants like Nvidia, providing essential memory chips for Nvidia’s in-demand GPUs.
As Wall Street prepares for results, expectations are sky-high. Analysts predict Micron will report quarterly revenues strikingly higher—approximately 90% above last year’s figures—despite a slight revision downwards by analysts, reducing expectations by 0.3% since last month. According to Bloomberg’s consensus, Micron is expected to achieve revenues of $7.66 billion, aligning closely with the company’s own guidance ranging from $7.4 billion to $7.8 billion, compared to $4.01 billion in Q4 2023. Additionally, expectations for adjusted earnings per share are set at $1.11, a substantial recovery from a loss of $1.07 in the previous year.
Trading has shown a positive uptick for Micron, with shares gaining nearly 2% leading up to the earnings call. However, investor expectations have escalated, often leading to disappointment even after what could traditionally be considered strong performances. This trend was evident in Micron’s previous quarterly results, which, while surpassing estimates, led to a significant drop in stock value due to its reported outlook merely meeting, not exceeding, expectations.
The chip sector, particularly AI-related, has seen a volatile trading environment lately. A recent decline in investor confidence was highlighted following Nvidia’s post-earnings reaction in late August, where even major profit increases were met with unsatisfactory stock performance.
Despite this environmental backdrop, nearly 93% of Wall Street analysts covering Micron recommend buying its stock, with many seeing a potential surge of over 50% in the next year, bringing target prices to around $143.94. Opinions vary, though: analysts like Morgan Stanley’s Joseph Moore suggest that lowered expectations may offer an opportunity for a stock rebound post-earnings. Conversely, JPMorgan holds a more optimistic view, maintaining its “Overweight” rating and positioning Micron as one of its top semiconductor picks for the upcoming year.
The overall semiconductor index, represented by the PHLX Semiconductor Sector Index, has begun a gradual upward trajectory following a recent dip, spurred on by a buoyant rally in tech stocks connected to recent interest rate cuts from the Federal Reserve and stimulus measures in China. This index has seen nearly a 6% increase over the last week, with Micron contributing a respectable 10% rise during the same period.
Further aiding Micron’s prospects is the anticipated passing of a legislative bill from President Joe Biden’s administration, aimed at easing environmental regulations for microchip projects funded by the CHIPS and Science Act. With Micron poised to benefit significantly from this legislation—expected to accelerate access to over $6 billion in federal subsidies for its planned manufacturing facilities in Idaho and New York—the company stands on the cusp of potentially transformative growth.
Micron’s developments are critical not only for investors but for the broader tech ecosystem, which relies on steady advancements within semiconductor production to fuel the next wave of technology. As the earnings report approaches, all eyes will be on Micron to gauge the company’s future trajectory in a landscape where innovation is paramount.