- Micron beats analyst forecasts and the stock is up 7% premarket as a result
- The big question is whether this presages a general revaluation of Micron stock
- The beat is only marginal so opinion could be volatile
Micron Technologies Inc (NASDAQ: MU) has produced an earnings beat above analyst estimations. The stock price has moved up 7% this morning as a result. The big question is what follows next. Will this be the start of a substantial revaluation of the stock and company prospects? Or is this just a surge that might fade?
The actual earnings beat is of $0.05 on non-GAAP of $2.16 and GAAP of $0.02 on $2.04. Revenue beats by $10 million on estimates of $7.69 billion. What matters perhaps more to the Micron stock price is predictions of the future where revenue guidance is now up to $7.5 billion from the analyst expectation of $7.03 billion. After all, it’s not the past that determines stock valuations but opinions about the future.
There are – at least – three ways to try to think through this. One is that well, we all know there are supply chain troubles in semiconductors at present. Can manufacturers are having to suspend production simply because they can’t gain the necessary supplies. Not that this necessarily has anything directly to do with Micron, but it does show a tight market, one in which there’s unlikely to be discounting, etc. We could think that the current results are just that, a reflection of a tough market. Or rather a tight market, which is great for suppliers into it like Micron. If so we might think this performance will fade as the supply chain gets itself sorted out.
We could also take that same supply chain tightness and think that there will be significant investment in expanding supply. That would turn out to be bad in the future for Micron as more supply enters that chain.
Or it’s possible to lift our heads from immediate concerns and think about the middle distance. This is what Hans Mosesmann at Rosenblatt has been doing. The analyst is looking at the next wave to hit the chip business. His insistence is that AI is the big coming thing. So, there will be outsized demand for processing chips – that being what AI runs upon, processing chips of course.
If that is true then we’ll see a step-change in prospects for Micron. It’s isn’t some short-term issue to do with the supply chain, it’s an entire change in the level of demand moving forward into the middle future.
Which vision of that future wins out is what will determine the Micron stock price. Good results are, well, they’re good. But a substantial rise in the addressable market is better. Opinions and decisions on that near future are what will determine a trading strategy in Micron stock. The difficulty is only in knowing which way the trade is going to go.
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