Key takeout
- Micron Technology (MU) is anticipated to report a third-quarter earnings per share (EPS) of $1.59, a significant increase from $0.62 last year.
- Revenues are expected to rise by 29.7% to $88.4 billion, driven by high demand for AI-related memory products.
- While HBM sales are projected to sell out by 2025, margin declines might overshadow these gains, impacting MU despite rising chip prices.
Micron Technology, Inc. (MU) is set to announce its third-quarter revenues after the market closes on Wednesday. Given the recent strong performance within the S&P 500, there’s potential for stock prices to rise if revenue and profits increase significantly in upcoming reports. So, should investors consider buying Micron’s stock or wait for clearer indications regarding margins? Let’s take a closer look.
What to anticipate from Micron’s fiscal third quarter revenue?
Micron’s expected earnings per share for the third quarter stands at $1.59, a remarkable jump of 156.5% compared to last year’s $0.62. This boost is largely driven by robust demand for Micron’s products within high-value segments, alongside improved pricing strategies.
Anticipated revenue for the third quarter is around $8.84 billion, reflecting a 29.7% increase from last year’s $6.8 billion, and surpassing the second quarter’s $8.05 billion. This upward trend suggests a growing demand in the memory sector, especially for AI-related applications.
Moreover, Micron has demonstrated an average positive revenue surprise of 10.7% over the past four quarters, which bodes well for achieving strong third-quarter performance and potentially boosting stock prices.
Why optimism around Micron’s progress?
The surge in artificial intelligence has heightened the demand for graphics processing units (GPUs), which are becoming increasingly vital for handling multiple tasks efficiently. Micron’s HBM3E memory leads the industry in meeting the storage requirements for these GPUs.
Nvidia Corporation has chosen Micron’s HBM for its new GB200 and GB300 Blackwell Systems. Along with other chip manufacturers like Broadcom and Marvell Technology, there’s a clear commitment to integrating HBM into their platforms, suggesting a fruitful trajectory for Micron.
With expectations that the data center HBM market could balloon to $35 billion this year and reach $100 billion by 2030, Micron is positioning itself well, claiming to sell out all its HBM capacity this year and negotiating contracts for the next. The robust need for HBM allowed Micron to raise prices by 11% in 2025.
How to approach trading Micron stocks ahead of earnings
Given the high demand for HBM products, strong revenue projections likely position Micron’s stock price favorably. The anticipated increase in AI chip sales via Micron’s HBM3E could further enhance its business value. Additionally, Micron aims to expand its market share against Samsung, particularly as Samsung encounters difficulties in passing Nvidia’s stringent qualification tests for the HBM3E memory chip compared to Micron’s improved yield rates.
Investors are encouraged to maintain their Micron stocks for potential long-term gains. Analysts are fairly optimistic about Micron’s outlook, adjusting the average short-term price target slightly from $127.07 to $123.60, with a maximum target of $172 representing a possible upside of 39.2%.
Nevertheless, it’s important for investors to note a decrease in Micron’s gross profit, which declined from 39.5% in the first quarter to 37.9% in the second quarter, and is projected at 36.5% for the third quarter.
Despite rising revenues, the company faces margin pressures due to intense pricing competition, which may counteract the benefits of increased volumes and improved market conditions. Hence, those considering new investments in Micron should possibly wait for the third-quarter results to better understand revenue growth and margin dynamics.
Currently, Micron holds a Zacks Rank of #3 (hold).
