Micron (MU) Tops Q2 Views, Shares Surge; Analysts Chime In

Micron Technology Inc. (NYSE MU) shares are trading strong today, up 8% following a solid second-quarter earnings report.

Micron reported quarterly pro-forma EPS of $0.04 on revs of $2.3 billion, compared to consensus EPS of $0.03 and revs of $2.06 billion.

Commenting on the results:

• Goldman Sachs notes revs came in about 7% above its estimate, and EPS were in-line with what the firm was expecting. Continuing, "higher revenues, lower R&D, lower taxes, and lower other/interest expense relative to our estimate was offset by a lower gross margin and a higher sharecount."
  
  Goldman is encouraged by stabilization in memory ASPs, which were "driven by continued supply discipline as well as concerns about incremental capacity tightness as a result of the tragic events in Japan." Goldman believes Micron shares are already priced on near-term strength.
  
  Looking ahead, Goldman has concerns about the continued benign strength of ASP trends based on: (1) a view that PC unit growth will remain lackluster at +6% yoy in 2011, (2) DRAM and NAND content growth which could be at risk if prices continue to move higher, and (3) potentially disappointing sell through of non-iPad tablets could drive NAND oversupply exiting 2011.
  
  Goldman increased its 12-month price target from $7 to $11, and maintains a Neutral rating.
  
  
• Wedbush said the quarter was surprising given gross margins which were crimped due to "lower memory ASPs, particularly DRAM, partially offset by manufacturing cost downs." Wedbush also notes Q2 "cash & cash equivalents decreased to $2.2B (from $2.4B) largely due to higher CapEx and acquiring the remaining non-controlling interest in TECH."
  
  Wedbush expects minimal short-term impact from the earthquake in Japan, and said it's too early to gauge the longer-term impact.
  
  Wedbush reiterated an Outperform rating and $15 price target.
  
  
• Well Fargo noted "Micron’s February quarter results were significantly better than we had estimated with revenue roughly flat sequentially in the seasonally weak February quarter."
  
  Looking ahead, Wells is "predicting a 16% decline in revenues in the May quarter followed by an 11% increase in revenues in the August quarter." Micron could do significantly better if memory prices remain stable over the next two-months, according to the firm.
  
  Specifically, about memory prices, 'If DRAM prices remained where they have averaged so far this quarter then ASPs would be flat compared to the February quarter average. If NAND prices remained flat from where they have averaged so far this quarter then NAND ASPs would be up a couple of percent in the May quarter."
  
  Wells Fargo is keeping its Outperform on the shares with valuation range of $10 - $12.
  
  
• Deutsche Bank mentioned that Micron beat the firm's expectations on both the top- and bottom-lines. Commenting on the quarter, "despite strong top-line performance MU delivered only modest EPS upside as GM declined -400 bps q/q. The company delivered on bit growth targets but poor product mix did little to moderate price declines in DRAM (-23% q/q) or NAND (trade -12% q/q). Higher capex will continue to pressure free cash flow and we remains skeptical of a rally in DRAM ASPs in 2011."
  
  Deutsche increased its price target on Micron from $10 to $11 and maintains a Hold rating.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• SK Hynix vs. Micron deep dive: who wins the AI memory supercycle?
• Surge Components, Inc. (SPRS) Tops Q2 EPS by 7c
• KeyBanc Reiterates Overweight Rating on McDonald's (MCD)