Earnings preview: What to expect from Micron’s Q4 earnings report

The announcement of Micron’s (MU) fourth-quarter earnings will be a closely-watched event. In the run-up to the report, which is expected at 4:00 PM on Thursday, the overall sentiment is bullish. Analysts expect earnings of $3.33 per share on revenues of $8.25 billion, in line with the forecast issued by the semiconductor giant. The estimate represents a 64% and 35% increase respectively from the same period last year.

Like in the past, investors bet on the company’s dynamic random access memory (DRAM) chips, used primarily in servers and personal computers. A strong, but less pronounced, growth is expected in the sale of NAND chips too. The strategic pricing of these products, which account for most of Micron’s revenue, and its effect on margins give the company a competitive advantage over rivals. However, the broad-based slump in the demand for memory chips in the data center and cloud businesses could partially offset the positive factors.

Investors bet on the company’s dynamic random access memory (DRAM) chips, used primarily in servers and personal computers

Some analysts believe falling chip prices and the recent escalation of the trade war between Washington and Beijing might drive the semiconductor industry to a correction. Last week, Goldman Sachs (GS) had downgraded Micron from Buy to Neutral, sending the stock tumbling.

Also, there are widespread concerns over the oversupply of NAND, which according to market watchers will continue at least for the next three quarters. The negative movement of Micron’s stock in recent times, falling behind the industry, has also dented the optimism to some extent. However, the stock looks more realistically priced now, giving room for a strong rebound after tomorrow’s earnings report.

Also see: Micron Q3 2018 earnings conference call transcript

In the third quarter, the Idaho-based chipmaker reported a sharp increase in profit as strong demand for chips and effective execution pushed up revenues. Earnings more than doubled to $3.15 per share during the quarter and exceeded expectations.

Micron’s shares surged 26% over the past twelve months and hit an 18-year high in June, but have declined progressively from the peak after the third-quarter earnings report triggered a selloff. The stock rose about 4% on Tuesday and made modest gains in premarket trading Wednesday, ahead of the earnings report.

Micron stock falls despite Q3 earnings beat