The Dirty Secret About Gold Mining Stocks... (From Golden Portfolio)
Micron Stock Will Retest All-Time Highs This Year 
Micron’s (NASDAQ: MU) stock price will retest its all-time highs this year because the Q2 results and guidance reveal an NVIDIA-like (NASDAQ: NVDA) moment. A long time in the making, Micron's results show the boom in demand for NVIDIA AI-focused GPUs. The data center semiconductor business grew 300% in Q4, leading to system-wide outperformance versus MarketBeat’s reported consensus and favorable guidance. Akin to NVIDIA’s performance since 2023, Micron’s guidance for Q3 revenue is about 500 basis points above the consensus estimates, leading analysts to increase their forecasts and raise their price targets, creating a strong tailwind for market action. A recent lawsuit may provide a headwind in the near term, but it will unlikely last long. Not only do about half of such lawsuits get dismissed, but the remainder are nearly always settled. Because the lawsuit focuses on forecasts for NAND demand recovery, which is seen in the Q2 results and guidance, the odds are high that this one will not get far. Conversely, the analysts' response to Micron’s results and guidance is overwhelmingly bullish. The dozen or so revisions tracked within the first twelve hours of the release include price target increases that lifted the low-end, consensus, and high-end target for the stock price. The new range suggests Micron is overvalued at $105, but the consensus, up 5% overnight, suggests a 35% upside, with many fresh targets leading to the high-end range. 
Micron’s Wow Results Go Unrewarded Micron had a solid quarter in FQ2 and issued robust guidance driven by increased demand for AI products. The company’s $8.05 billion net revenue is up 38.3% year-over-year and outpaced the consensus by 170 basis points on strength in DRAM and NAND markets. DRAM increased by 47%, driven by a 3x increase in data center sales; NAND increased by a smaller but still solid 18.4%. Regarding end markets, weaknesses in mobile and embedded were offset by a 109% increase in Computer & Networking and a 54% gain in Storage. Margin news is also good. The company experienced margin pressure relative to last year but far less than expected, with gross and operating margins rising significantly sequentially. The takeaway is that operating cash flow increased by 21% sequentially and more than 300% compared to the prior year due to inventory normalization, allowing for aggressive investment in next-gen technology, including the soon-to-be-launched 1-gamma DRAM node. It is the company’s first use of EUV lithography in its 6th-generation DRAM manufacturing process. It will produce HBM chips with higher density and improved power consumption and performance. Micron’s guidance is good. The company issued Q3 guidance with revenue and earnings well above the consensus forecasts. The strength will come from DRAM and NAND markets, including data centers and consumer-focused applications. Micron says it is back on track to produce record revenue and a wider margin for the year. Micron Builds Value for Investors in Q2 Micron’s balance sheet highlights reflect the impact of investments but are otherwise healthy and point to increasing equity as the year progresses. The company’s cash balance is relatively stable, current and total assets are up, total assets on increased property, and liability increases only partially offset it. The net result is a 7.7% increase in equity and persistently low leverage. Long-term debt is less than 0.3x equity and 2x cash. The price action in Micron stock following the release is lackluster, with shares down about 3.5% ahead of the open. However, the market remains above critical support levels and a likely price floor and is on track to continue moving sideways if it doesn’t begin to rebound. The critical support target is near $100; the critical resistance is near $110. Written by Thomas Hughes Read this article online › Featured Stories: Did you like this article?  
| 
No comments:
Post a Comment