Micron raises Q2-2017 revenue and EPS estimates

Strong demand for memory chips enabled the stock of Micron Technology Inc. (NASDAQ: MU) to scale a new 12-month high of $25.92 per share. Ironically, the company had posted a y-o-y decline in the GAAP net profit to $180 million or $0.16 per share in the first-quarter of fiscal 2017. Last week, the company raised its fiscal 2017 second-quarter guidance. We anticipate the upbeat outlook to keep the stock in a bullish orbit, as explained below.

While reporting the first-quarter results, Micron announced that it anticipates second-quarter revenues in the range of $4.35 billion to $4.7 billion. The company has now raised the revenue guidance to $4.65 billion (+/- $50 million). This compares with a Zacks consensus estimate of $4.62 billion.

Micron also raised its Q2-2017 earnings to $0.86 per share, from the prior guidance range of $0.58 to $0.68 per share. Analysts are forecasting earnings of $0.77 per share for the quarter.

MicronTechnology

In the past few years, the memory chip industry saw consolidation and decline in the production capacity. The technological advancements have also contributed to optimum fab utilization. All these factors are expected to prove beneficial to the company in the fiscal 2017. The company is also focusing on the latest developments such as the Internet of Things (IoT) and industrial computing to increase the market share in the long run. With a cash balance of $4.01 billion and liabilities of just $1.16 billion, undeniably, the company has a strong financial health.

Notably, the stock of Micron is moving in line with the semi-conductor industry trends for the past one year. The stock of Micron has appreciated by 136.8%, versus 137.8% gains by the industry.

Investment research firm Cowen, which has given an outperform rating to the stock, has raised the target price by one dollar to $34. Similarly, the Credit Suisse group has reiterated the “buy” rating for the stock with a target price of $30. On a scale ranging from one to five, the average broker rating for the stock is 1.42. A rating of one and five indicates “strong buy” and “strong sell” respectively.

The stock is moving along an ascending channel as shown in the image below. The rising MACD indicator confirms the underlying bullishness in the scrip. So, we can expect the stock to forge new heights soon.

To trade the probable uptrend, a binary trader should purchase a high or above option, which expires in one week. The contract can be purchased as long as the stock of Micron trades near $25 in the major exchanges.

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