Should you buy Micron shares on post-earnings weakness?

on Oct 3, 2022
Updated: Jan 25, 2024
  • Micron Technology disappoints on the guidance for fiscal Q1.
  • BMO analyst Ambrish Srivastava remains bullish on "MU".
  • Micron shares are now down about 45% for the year.

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Micron Technology Inc (NASDAQ: MU), late on Thursday, cited blown up inventory and supply chain challenges at large as it reported mixed results for its fiscal fourth quarter. Shares still ended roughly flat for the week.

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Is it an opportunistic time to invest in the Micron stock?

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More alarmingly, the memory-chip specialist warns of continued weakness in Q1.

It guided for up to six cents of loss in the current quarter on $4.0 billion to $4.5 billion in revenue. In comparison, experts were at 69 cents of per-share earnings and $5.71 billion revenue.

Still, Ambrish Srivastava (BMO Capital) continues to recommend that long-term investors buy Micron shares. He lowered his price target after the earnings report to $70 but that still represents about a 40% upside from here.

Why is this analyst bullish on Micron shares?

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The bullish view is predicated on spending cuts the Nasdaq-listed firm announced on Thursday. Srivastava wrote:

Micron is responding proactively and much more aggressively to rein in supply. Wafer Fab Equipment spending is now expected to be down 50%; overall CAPEX down 30%.

The analyst expects supply and demand to be back in balance in 2023. Also on the positive side were CFO Mark Murphy’s remarks that the back-up inventory was “high quality” and “usable”.

All-in-all, Srivastava is convinced the risk-reward is still fascinating for the long-term investors. But the near- to medium-term outlook, he agreed, was “iffy”.

Key takeaways from Micron Q4 earnings report

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  • Net income printed at $1.49 billion versus the year-ago $2.72 billion
  • Per-share earnings tanked significantly from $2.39 to $1.35
  • Adjusted EPS came in at $1.45 as per the earnings press release
  • Revenue went down 20% on a year-over-year basis to $6.64 billion
  • Consensus was $1.37 of adjusted EPS on $6.73 billion in revenue

Micron Technology ended the quarter with just over $11 billion in cash, marketable investments, and restricted cash. Its board declared a quarterly cash dividend of 11.5 a share this week.

By and large, Wall Street still has a consensus “overweight” rating on Micron shares that are currently trading way below their previous five-year price-to-earnings multiple.

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