Shares of Micron (MU - Free Report) were up nearly 7% through afternoon trading hours Thursday, as investors proved keen to test the waters of chip stocks on the back of a few notable earnings reports from industry bellwethers.
The report that could be driving Micron shares higher was delivered by Lam Research (LRCX - Free Report) on Wednesday afternoon. Lam Research is a major provider of equipment to the semiconductor business, so investors view its results and outlook as indicators of the overall business.
For the most recent quarter, Lam Research posted better-than-expected earnings and revenue. Adjusted profits came in at $3.87 per share, beating the Zacks Consensus Estimate by 20 cents. Meanwhile, revenue in the period was $2.52 billion, up about 8% on a year-over-year basis.
Lam also managed to guide reasonably well. The company said it expects current quarter revenue to land in the range of $2.25 to $2.55 billion. The Zacks Consensus Estimate is currently calling for revenue of $2.43 billion. Lam was able to record revenue of $2.89 billion in the prior-year quarter.
Some investors also liked the tone of management’s comments attached to the report.
“While near-term market trends reflect adjustments after a period of tremendous growth in semiconductor demand, I am confident that our focus on Deposition and Etch technology leadership as well as growth in our installed-base business positions us well for the long term,” said Lam Chief Executive Timothy Archer.
Semiconductor bulls are likely to see Archer’s comments as confirmation that the pullback from the industry’s growth peak will not be too harsh, while bears will hear “adjustments” and think of the troubling oversupply issues that have plagued major manufacturers.
On Thursday, the bulls appear poised to win at least one battle. Micron shares were up 7% to $36.65 through 2:00 PM EST, extending a run of momentum that has now seen the embattled chipmaker rebound roughly 19% in the past month.
It wasn’t all great news for the semiconductor business on Thursday, however. Chip giant Texas Instruments (TXN - Free Report) , although comfortably in the green on the day, warned in its report Wednesday afternoon that “demand continued to slow across most markets.”
This tone caused some analysts to caution investors about predicting a premature end to the industry’s pullback. For instance, Stifel’s Tore Svanberg argued that Texas Instrument’s comments pointed to limited visibility into both the depth and duration of the current downtrend.
“People were expecting even worse results. It does not mean everything is behind them... We are still in downturn and what macro does in the next few months and quarters nobody knows,” Svanberg said.
Nevertheless, today’s positive movements in chip stocks, including Micron, underscore a growing belief that this cyclical pullback will be muted by growing secular demand from artificial intelligence, 5G, self-driving cars, cloud computing, and other new and exciting tech growth trends.
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