Deep dive: here's why Micron's guidance shouldn't concern investors much

Investors are bailing on Micron Technology Inc (NASDAQ: MU) this morning after the chipmaker issued guidance for its current fiscal quarter that missed Street estimates.

Micron expects to earn $1.43 per share (adjusted) on $7.9 billion in revenue in Q2.

Analysts, in comparison, were at $1.91 a share and $8.98 billion, respectively.

Micron stock is down about 12% at writing – a sell-off that Wedbush senior analyst Matt Bryson dubs an opportunity to buy a quality name at a deep discount.

Why is Wedbush bullish on Micron stock?

Matt Bryson attributed much of the weakness in Micron’s outlook to excessive supply and built-up inventory.

But the analyst expects things to get better moving forward as Micron has been cutting back on production. In fact, the chipmaker plans on dialing down its investments into everything except high band width memory for AI.

Bryson is convinced that MU will return to growth in the back half of its current fiscal year – just as the company told investors in the press release. He continues to see upside in Micron stock to $140 that suggests it’s well-positioned to offer more than 50% returns in 2025.

While waiting for recovery, investors can also enjoy a dividend yield of 0.44% coupled with MU shares at writing.

Micron is well ahead of its competition

Bryson agreed that competition is ticking up particularly from the likes of China.

Nonetheless, he recommended loading up on MU stock as the Chinese vendors including CXMT and YMTC still account for only a fraction of the memory market.

Plus, “they can really only sell to China,” he added in an interview with CNBC on Thursday.

All in all, the Wedbush analyst does not see competition from Chinese vendors as a serios long-term concern as they are rather restricted in terms of customer base and are significantly less advanced than Micron as well.

Micron shares are now down about 40% versus their year-to-date high in June.

MU shares are trading just above a key support

Wedbush analyst Matt Bryson also took heart in the fact that Micron Technology came in ahead of Street estimates in its recently concluded quarter.

Analysts at Stifel echoed his bullish view this morning as they adjusted the price target on MU to $130 that indicates potential for about a 45% upside from here.

Wall Street expects Micron’s commitment to high band width memory to unlock significant upside in its share price as it positions the company to benefit from rapid growth and continued focus on artificial intelligence.

Statista anticipated the AI market to grow at a compound annualised rate of more than 28% over the next five years.

Note that Micron stock is currently trading just above a key support at $90.