Amidst optimistic voices, what does Micron Tech's financial report reveal?

Against the backdrop of the ongoing warming up of the semiconductor industry, Micron Technology is set to announce its financial results for the third quarter of the 2024 fiscal year after the U.S. stock market closes this Wednesday. Wall Street analysts are generally optimistic, expecting Micron to deliver an impressive report. Moreover, just before the earnings release, the target price for Micron was raised overnight.

According to analysts' estimates compiled by the media, Micron's revenue for the third quarter is expected to reach $6.63 billion, a significant increase of 76.8% from $3.75 billion in the same period last year. It is worth noting that Micron has exceeded analysts' revenue estimates for four consecutive quarters, outperforming expectations in 7 out of the past 10 quarters. Will Micron continue to surprise Wall Street this time?

Analysts also predict that Micron will return to profitability in the third quarter, with a net profit of $399 million and earnings per share of $0.30, compared to a loss of $1.9 billion and a loss per share of $1.73 in the same period last year.

Supported by AI, fourth-quarter guidance may exceed market expectations

The AI business is undoubtedly one of the key focuses of this financial report.

As an important partner of AI chip maker NVIDIA, Micron provides high-bandwidth memory chips for its AI graphics processing units (GPUs). Investors will closely monitor Micron's progress in the AI field, especially the growth of its high-bandwidth memory (HBM) business.

Analysts at JP Morgan expect that the HBM business will become a key support for Micron's performance guidance.

Given the surge in demand for AI chips, analysts from JP Morgan, Citigroup, and other investment banks predict that Micron is likely to provide fourth-quarter guidance that exceeds market expectations.

For example, analysts at Citigroup estimate that Micron's fourth-quarter revenue guidance could reach $8 billion, a significant increase from the third quarter.

A strong guidance not only reflects the management's confidence in future business growth but may also be a significant factor driving stock price appreciation.

Previously, Micron CEO Sanjay Mehrota stated after the second-quarter earnings release:

Our outstanding product portfolio enables us to deliver strong performance in the second half of the 2024 fiscal year. We believe Micron is one of the biggest beneficiaries in the semiconductor industry, benefiting from the opportunities brought by AI.

Rosenblatt analyst Hans Mosesmann believes that the demand for AI applications will continue to grow in Micron's third quarter, with several positive trends expected to continue into 2026 and 2027.

Is Micron Firmly Bullish on Chip Prices?

In addition to demand, the market is also paying attention to Micron's views on chip price trends.

Analysts at JP Morgan predict that Micron may reiterate its view that DRAM and NAND memory chip prices will rise between 2024 and 2025. Providing more details and evidence for this prediction would undoubtedly enhance investor confidence Analyst Matt Bryson of Wedbush believes that the increase in average selling price in the third quarter may be a key point to watch.

Bryson expects Micron's third-quarter performance to exceed analysts' expectations and has raised guidance, with average selling price, revenue, profit margin, and earnings per share all showing an upward trend.

Is the Capacity Expansion Delayed?

Lastly, investors are also paying attention to the latest developments in Micron's capacity expansion.

There have been reports that a new factory project of Micron in New York State is facing construction delays, with the groundbreaking possibly postponed to 2025.

This project is crucial for Micron to increase domestic chip production, so the company may provide explanations on this during the earnings conference call.

Analysts are Increasing Target Prices

Benefiting from the AI investment boom, Micron's stock price has been strong this year, rising by over 60% as of the close on Tuesday to reach $141.12.

It is worth mentioning that before the earnings report announcement on Wednesday, many institutions raised Micron's target price:

Wedbush maintains an "outperform" rating and recently raised the target price from $130 to $170;

Rosenblatt has a "buy" rating with a target price of $225;

Morgan Stanley has a "neutral" rating, raising the target price from $130 to $140;

Citi has a "buy" rating, raising the target price from $150 to $175;

Baird maintains an "outperform" rating, raising the target price from $150 to $172;

Raymond James maintains an "outperform" rating, raising the target price from $130 to $160;

Wolfe Research maintains an "outperform" rating, raising the target price from $150 to $200.

This to some extent reflects the market's optimistic expectations for the company's prospects. However, it also means that if the earnings report falls short of expectations, the stock price may face downside risks