Micron Technology (MU): Strong Rev and GM Momentum, PT To $45 - Wells Fargo
Wells Fargo analyst, David Wong, reiterated his Outperform rating on shares of Micron Technology (NASDAQ: MU) after the August quarter results show strong revenue and gross margin momentum, with a further sequential rise in sales and improvement in gross margin expected in the upcoming, November quarter.
DRAM bit sales increased 5% sequentially and NAND bit sales increased 3% sequentially. DRAM average sales price increased 8% while cost per bit decreased 4% in the quarter. Micron reported that its non-GAAP DRAM gross margin increased 5 percentage points sequentially to 59% due to an 8% increase in DRAM ASP. Micron expects its FY18 DRAM output growth to be slightly below the expected industry growth rate of 20% in CY18. Micron reported that its non-GAAP trade NAND gross margin decreased 1 percentage point sequentially to 40% as a result of a flash component issue on select TLC 3D NAND products.
The analyst stated "we are introducing our FY19 GAAP EPS estimate of $5.60, which is below our FY18 estimate. If the positive memory pricing environment continues there may be reason to raise our FY19 EPS estimate in the future."
The price target increases to $45 from $40 based on 8x FY19 GAAP EPS estimate of $5.60.
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Shares of Micron Technology closed at $34.18 yesterday.