Wall Street will get a glimpse into what’s ahead for US chipmakers

By Investor Empires On Sep 25, 2024

Micron (MU) is the first chipmaker to report quarterly results this earnings season. Its report, due after the close of trading on Wednesday, is set to offer insight into the performance of the semiconductor sector amid high expectations from Wall Street.

Micron’s memory chip business has seen a major upswing over the past year as big tech companies pour billions of dollars into the semiconductor sector for hardware to power AI data centers.

Micron is unique in that it partners with chip giant Nvidia (NVDA), rather than competing with it. Micron supplies memory chips for graphics processing units, which are in high demand from Nvidia.

Wall Street expects Micron to post quarterly revenue that’s 90% above last year — after analysts cut their forecasts slightly by 0.3% from last month. Here’s a breakdown of analysts’ expectations, based on Bloomberg consensus estimates:

profit: $7.66 billion (Micron guidance: $7.4 billion to $7.8 billion) vs. $4.01 billion in Q4 2023
Adjusted earnings per share: $1.11 (Micron guidance: $1 to $1.16) vs. $1.07 loss in Q4 2023

Shares of the chipmaker rose about 2% in Wednesday trading.

Investors have set incredibly high and ever-increasing standards for AI chipmakers, leaving them disappointed in recent months. Micron’s third-quarter earnings failed to impress investors in late June.

Instead, shares fell on fourth-quarter forecasts that were in line with Wall Street expectations (rather than beating them). Nvidia shares also fell after reporting quarterly earnings in late August. Despite doubling earnings and beating sales expectations, investors wanted more from the semiconductor superpower. Nvidia has since rebounded, but Micron shares are down more than 30% from three months ago.

FILE - A sign marks the entrance to Micron Technology's automotive chip manufacturing plant on Feb. 11, 2022, in Manassas, Virginia. On Tuesday, Oct. 4, chipmaker Micron announced an investment of up to $100 billion over the next 20 years to build a plant in upstate New York that could create 9,000 jobs at the plant. (AP Photo/Steve Helber, File) — Micron Technology’s automotive chip manufacturing plant in Manassas, Va. (AP Photo/Steve Helber, File) (Associated Press)

Nearly 93% of Wall Street analysts covering Micron recommend buying the stock. On average, they expect the company’s stock to rise more than 50% over the next year to $143.94. However, their opinions on Micron are mixed.

Morgan Stanley’s Joseph Moore believes Wall Street’s more moderate outlook could help boost the stock after earnings. “Micron stock could rebound after earnings given its near-term decline, especially if enthusiasm returns to AI beneficiaries,” he wrote in a note to investors earlier this week. But Moore maintained his Equal Weight rating on Micron and sees the stock as “fundamentally overpriced.”

On the other hand, JPMorgan Chase maintained its “overweight” rating on the stock and said it “remains one of our top semifinalist picks next year.”

The PHLX Semiconductor Index (^SOX) has begun to recover from a decline seen earlier in the month as technology stocks rallied in the wake of the U.S. Federal Reserve’s massive rate cut and China’s central bank’s sweeping stimulus package. The index is up about 6% over the past week. Micron has been part of the trend, rising about 10% over the period.

The company is also set to benefit from: Bill awaits President Joe Biden’s signature This would ease environmental requirements for microchip projects funded under the Microchips and Science Act. Micron is one of the Biggest Beneficiaries of CHIPS Act FundingThe Building Chips in America Act, passed by the U.S. House of Representatives on Monday, will allow the company faster access to more than $6 billion in federal subsidies for its products. Plans to build microchip factories in Idaho and New York.