Here’s Our New Micron Price Target After It Crushes Earnings Estimates
Shares of Micron ($MU) roared higher by 12% after Wednesday’s close after the semiconductor manufacturer reported strong third-quarter earnings.
Micron crushed analysts’ projections, earning $25.11 per share, far above the consensus estimate of $20.86. Revenues climbed to $41.4 billion, well above estimates of $36 billion.
While those figures are impressive, it was Micron’s forward projections that stole the show. For the current quarter, Micron predicts earnings in the area of $31 per share, and revenues in the $50 billion range.
Be sure to check out our risk management plan for Micron. The stock has climbed 850% since we first recommended it two years ago.
Micron vs. the SOX
If we compare Micron to the semiconductor sector as a whole, represented below by the Philadelphia Semiconductor Index (SOX), we see two virtually identical charts.
If the after-hours gains hold, Micron (right chart) and the semiconductor index (left chart) could both reach new highs in the near future.
Trouble in Chipville?
Not all of the semiconductor manufacturers are looking as good as Micron.
For example, a small rounded top has formed on Nvidia’s ($NVDA) chart. The $4.8 trillion market darling closed at a six-week low on Wednesday, and also closed below $200 for the first time since early May. Based on this chart, we could soon see Nvidia back in the $180’s.
Qualcomm ($QCOM) has formed a bearish pattern that has the appearance of a head and shoulders (shaded blue). This formation suggests Qualcomm could slide to the $160 area.
Shares of Broadcom ($AVGO) fell from all-time highs after reporting earnings on June 3. This stock is struggling to climb back above its 50-day moving average (blue).
When I see these market leaders struggling, I have to wonder if we’re seeing a changing of the guard. Micron, Advanced Micro Devices ($AMD), Taiwan Semiconductor ($TSM), Intel ($INTC) and Lam Research ($LRCX) all currently have stronger charts than the three names listed above.
Bank of America, Needham Weigh In on Micron
Where is Micron headed next? Institutional analysts have some strong opinions.
Bank of America raised its target price for the stock to $1,500 from $950 one day prior to Wednesday’s earnings report. Also just prior to Micron’s earnings, Needham raised its target to $1,550.
Analysts at Goldman Sachs were less enthusiastic. Goldman maintains a neutral rating on Micron, with a target price of $900.
Our New Price Target for Micron
Micron just indicated that its earnings per share will increase from $25.11 in the just-ended quarter to approximately $31 in the current quarter. That’s a sequential gain of over 23%, assuming that Micron only matches that estimate.
I feel strongly that Micron wouldn’t give that estimate unless it was sure it could beat it. So, let’s assume that at the next quarterly report, we’ll hear that Micron has grown earnings at about 25%, quarter over quarter.
If this company can grow its earnings by 25% in three months, is it unreasonable to assume that the stock can rise by 25%? Not necessarily by 25% in three months, but eventually.
In after-hours trading, Micron climbed to $1,200 per share. Add another 25% to that figure, and you’ll have our new target price of $1,500.
At the time of publication, Ponsi was long MU, NVDA, AVGO and AMD.
