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7 Reasons to Add Micron (MU) Stock to Your Portfolio Now
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Shares of Micron Technology Inc. (MU - Free Report) , one of the leading worldwide providers of semiconductor memory solutions, have been performing well of late.
If you haven’t taken advantage of the share price appreciation yet, its time you add the stock to your portfolio as it looks promising and is poised to carry the momentum ahead. This Zacks Rank #2 (Buy) stock has an estimated long-term earnings growth rate of 10% and VGM Style Score of “A”.
Estimates Northbound
Estimates for Micron have moved up in the last 30 days, reflecting the optimistic outlook of analysts. The earnings estimates for fiscal 2017 and 2018 have gone up in the last 30 days.
For fiscal 2017, the Zacks Consensus Estimate for earnings has gone up 2.9% in the last 30 days and is pegged at $3.78. The Zacks Consensus Estimate for fiscal 2018 also moved north by 3 cents (0.6%) to $4.98 during the same time frame.
Positive Earnings Surprise History
Micron outpaced the Zacks Consensus Estimate in three of the trailing four quarters, generating an encouraging positive average earnings surprise of 17.2%.
Ahead of the Industry
Micron has outperformed the Zacks Electronic-Semiconductor industry in the last one year. Share price of Micron rose 138.9% compared with the industry’s gain of just 41.2%.
Upbeat Q3
Micron reported strong third-quarter fiscal 2017 adjusted earnings per share (excluding the impact of one-time items but including stock-based compensation expense) of $1.40 per share, beating the Zacks Consensus Estimate of $1.37 per share.
On a Non-GAAP basis, the company reported earnings of $1.62 per share compared with a loss of 3 cents reported in the year-ago quarter.
Micron’s revenues in the quarter increased 92.1% on a year-over-year basis to $5.566 billion and surpassed the Zacks Consensus Estimate of $5.370 billion. The year-over-year increase was primarily due to strong DRAM pricing environment and favorable product mix. Also, reported revenues increased on a quarter-over-quarter basis (up 20%), primarily due to pricing improvement in the DRAM and NAND sales volume.
Raised Guidance
For the fourth quarter of fiscal 2017, Micron expects revenues in the range of $5.7–$6.1 billion. The Zacks Consensus Estimate is pegged at $5.55 billion. The company expects earnings per share in the range of $1.73–$1.87 per share. The Zacks Consensus Estimate is pegged at $1.80 per share.
Micron expects favorable supply and demand dynamics to continue in 2017.
Valuation
On the valuation front too, the stock looks attractive. The company currently trades at a forward P/E multiple of 7.9x, significantly lower than the Zacks categorized Electronics-Semiconductor industry’s average of 14.7x. The ratio, which is obtained by dividing a stock’s current market price with its historical or estimated earnings, measures how much an investor needs to shell out per dollar of earnings. Therefore, the lower the P/E of a stock, the better for a value investor.
Growth Drivers
Micron is anticipated to benefit from strong demand for NAND flash memory chips, which are used in smartphones and tablets. Driven by new tablet products and greater adoption of solid state drive (SSD), total demand in the NAND flash memory industry could surpass manufacturing capacity, leading to a periodic shortage and higher pricing in the near term.
Additionally, we are positive about the company’s strategy of enhancing capabilities through acquisitions which are likely to boost its top-line performance. The acquisition of Inotera in Dec 2016 is estimated to be accretive to Micron’s DRAM gross margin, earnings per share and free cash flow. According to the company, the acquisition will also have some operational benefits, leading to efficient management of investment levels and cadence followed by alignment with global manufacturing operations.
Looking at the improving selling prices for DRAM and strategic initiatives toward expanding in the SSD market, we feel Micron is a technology stock that deserves a place in investors’ portfolio.
Applied Optoelectronics, Applied Materials and Broadcom have a long-term EPS growth rate of 20%, 16.6% and 13.6%, respectively.
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7 Reasons to Add Micron (MU) Stock to Your Portfolio Now
Shares of Micron Technology Inc. (MU - Free Report) , one of the leading worldwide providers of semiconductor memory solutions, have been performing well of late.
If you haven’t taken advantage of the share price appreciation yet, its time you add the stock to your portfolio as it looks promising and is poised to carry the momentum ahead. This Zacks Rank #2 (Buy) stock has an estimated long-term earnings growth rate of 10% and VGM Style Score of “A”.
Estimates Northbound
Estimates for Micron have moved up in the last 30 days, reflecting the optimistic outlook of analysts. The earnings estimates for fiscal 2017 and 2018 have gone up in the last 30 days.
For fiscal 2017, the Zacks Consensus Estimate for earnings has gone up 2.9% in the last 30 days and is pegged at $3.78. The Zacks Consensus Estimate for fiscal 2018 also moved north by 3 cents (0.6%) to $4.98 during the same time frame.
Positive Earnings Surprise History
Micron outpaced the Zacks Consensus Estimate in three of the trailing four quarters, generating an encouraging positive average earnings surprise of 17.2%.
Ahead of the Industry
Micron has outperformed the Zacks Electronic-Semiconductor industry in the last one year. Share price of Micron rose 138.9% compared with the industry’s gain of just 41.2%.
Upbeat Q3
Micron reported strong third-quarter fiscal 2017 adjusted earnings per share (excluding the impact of one-time items but including stock-based compensation expense) of $1.40 per share, beating the Zacks Consensus Estimate of $1.37 per share.
On a Non-GAAP basis, the company reported earnings of $1.62 per share compared with a loss of 3 cents reported in the year-ago quarter.
Micron’s revenues in the quarter increased 92.1% on a year-over-year basis to $5.566 billion and surpassed the Zacks Consensus Estimate of $5.370 billion. The year-over-year increase was primarily due to strong DRAM pricing environment and favorable product mix. Also, reported revenues increased on a quarter-over-quarter basis (up 20%), primarily due to pricing improvement in the DRAM and NAND sales volume.
Raised Guidance
For the fourth quarter of fiscal 2017, Micron expects revenues in the range of $5.7–$6.1 billion. The Zacks Consensus Estimate is pegged at $5.55 billion. The company expects earnings per share in the range of $1.73–$1.87 per share. The Zacks Consensus Estimate is pegged at $1.80 per share.
Micron expects favorable supply and demand dynamics to continue in 2017.
Valuation
On the valuation front too, the stock looks attractive. The company currently trades at a forward P/E multiple of 7.9x, significantly lower than the Zacks categorized Electronics-Semiconductor industry’s average of 14.7x. The ratio, which is obtained by dividing a stock’s current market price with its historical or estimated earnings, measures how much an investor needs to shell out per dollar of earnings. Therefore, the lower the P/E of a stock, the better for a value investor.
Growth Drivers
Micron is anticipated to benefit from strong demand for NAND flash memory chips, which are used in smartphones and tablets. Driven by new tablet products and greater adoption of solid state drive (SSD), total demand in the NAND flash memory industry could surpass manufacturing capacity, leading to a periodic shortage and higher pricing in the near term.
Additionally, we are positive about the company’s strategy of enhancing capabilities through acquisitions which are likely to boost its top-line performance. The acquisition of Inotera in Dec 2016 is estimated to be accretive to Micron’s DRAM gross margin, earnings per share and free cash flow. According to the company, the acquisition will also have some operational benefits, leading to efficient management of investment levels and cadence followed by alignment with global manufacturing operations.
Looking at the improving selling prices for DRAM and strategic initiatives toward expanding in the SSD market, we feel Micron is a technology stock that deserves a place in investors’ portfolio.
Other top-ranked stocks in the broader technology include Applied Optoelectronics, Inc. (AAOI - Free Report) , Applied Materials, Inc. (AMAT - Free Report) and Broadcom Limited (AVGO - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Optoelectronics, Applied Materials and Broadcom have a long-term EPS growth rate of 20%, 16.6% and 13.6%, respectively.
5 Trades Could Profit ""Big-League"" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>