Micron (MU) is the first chipmaker to report quarterly results this earnings season. The report, scheduled for release after the bell on Wednesday, will provide insight into how the semiconductor sector is performing amid high expectations from Wall Street.
Micron’s memory chip business has seen a resurgence in the past year as major technology companies pour billions into the semiconductor sector for hardware to power artificial intelligence data centers.
Micron differentiates itself by partnering with, rather than competing with, industry powerhouse Nvidia (NVDA). Micron supplies memory chips for Nvidia’s highly sought-after GPUs.
Wall Street expects Micron to post quarterly revenue that’s 90% higher than last year — after analysts trimmed their expectations slightly by 0.3% from a month ago. Here’s a look at analysts’ forecasts, according to Bloomberg consensus estimates:
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Gain: $7.66 billion (Micron’s guidance: $7.4 billion to $7.8 billion) vs. $4.01 billion in Q4 2023
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Adjusted earnings per share: $1.11 (Micron’s guidance: $1 to $1.16) vs. a loss of $1.07 in Q4 2023
The chipmaker’s shares rose as much as 2% on Wednesday.
Investors have staggeringly high and ever-increasing standards for AI chipmakers, which has often disappointed them in recent months. Micron’s third-quarter earnings beat in late June did little to convince investors.
Instead, shares tumbled on fourth-quarter guidance that met (rather than exceeded) Wall Street expectations. Nvidia shares also fell after reporting quarterly results in late August. Despite more than doubling profits and beating sales forecasts, investors wanted more from the semiconductor superpower. Nvidia has since recovered, but Micron shares are down more than 30% from three months ago.
Nearly 93% of Wall Street analysts covering Micron recommend buying the stock. On average, they expect the stock to rise more than 50% over the next year to $143.94. Still, their opinions on Micron are mixed.
Morgan Stanley’s Joseph Moore thinks Wall Street’s softer expectations could help boost the stock after the earnings report. “MU stock could rebound on gains given the low near-term bar, especially if enthusiasm returns to AI beneficiaries,” he wrote in a note to investors earlier this week. But Moore maintained his Equal Weight rating on Micron and sees the stock as “fundamentally expensive.”
JPMorgan, on the other hand, maintained its Overweight rating on the stock, saying it “remains one of our top picks for the semifinals next year.”
The PHLX Semiconductor Sector Index (^SOX) has started to recover from an early-month slump as tech stocks rallied following the U.S. Federal Reserve’s jumbo rate cut and the People’s Bank of China’s broad stimulus package. The index has risen nearly 6% over the past week. Micron has been part of that trend, rising nearly 10% over that period.
The company also stands to benefit from a bill awaiting President Joe Biden’s signature that would ease environmental requirements for microchip projects funded by the CHIPS and Science Act. Micron is one of the largest beneficiaries of CHIPS Act funding, and the Building Chips in America Act passed by the U.S. House of Representatives on Monday would give the company faster access to more than $6 billion in federal grants for its microchip factories planned for Idaho and New York.
Laura Bratton is a reporter for Yahoo Finance.
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