Micron (MU) Shares Look Interesting Despite the Miss - Wells Fargo
Wells Fargo analyst, David Wong, maintained his valuation range of $16 - $19 on Micron Technology (NASDAQ: MU) despite the company falling short of consensus and the analyst reducing EPS estimates. The analyst believes that near-term fluctuations in earnings do not change the view that Micron's earnings power in the future could well be $2 or more per share. No change to Outperform rating.
Micron reported sales of $3.35 billion (down 7% qtr/qtr and down 27% yr/yr). This was below the midpoint of Micron's guidance for sales of $3.35-$3.6 billion. As-reported diluted GAAP EPS amounted to $0.19 per share, below the consensus estimate of $0.20,
Revenue guidance for the coming quarter is for sales of $2.9-$3.2 billion, compared to consensus of $3.47 billion. Gross margin is expected to be in the 17.5% to 20% range. Micron's SG&A expenses amounted to $179 million in the quarter, versus $170 million in the prior quarter. R&D expenses amounted to $421 million in the quarter, versus $379 million in the prior quarter. Operating expenses are expected to be around $565-$620 million in the coming quarter.
DRAM cost per bit decreased 10% in the quarter, while trade NAND cost per bit decreased 6% in the quarter. DRAM bit production increased 2% sequentially with ASP down 13% sequentially. Trade NAND bit production increased 5% sequentially with trade NAND ASP down 7% sequentially.
Wells Fargo's FY16 GAAP EPS estimate falls to $0.15 from $0.84 and FY17 GAAP EPS falls to $1.20 from $1.80. Applying multiples of 13x and 16x to 2017 estimates gives you a fair value range of $16 - $19.
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Shares of Micron Technology closed at $14.61 yesterday.