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Micron & Other Chip Bigwigs to Focus on Ahead of Earnings

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Micron Technology, Inc. (MU - Free Report) is set to report fiscal fourth-quarter earnings on Sep 26, after market close. Needless to say, the company is one of the leaders in the DRAM and NAND semiconductor markets. DRAM is used in desktop computers, while NAND is a flash memory.

Micron has been progressing leaps and bounds a while back, thanks to a surge in memory demand on expanding cloud data centers, the Internet of Things, autonomous vehicles and new technologies, including 5G, to name a few. Thanks to the U.S.-China trade war, many of Micron’s customers from being buyers turned into sellers and remained overly cautious. The memory giant had a number of Chinese customers, including Huawei, which has made it vulnerable to trade issues. Demand for chip has slowed down, hurting Micron’s profits. The chipmaker, now, along with the rest of the broader industry had to cut down on capital expenditures.

However, things are now looking up for the chips market. And it’s solely because things have improved on the trade front. President Trump recently said that a deal to end the protracted trade war could happen “sooner than you think.” He added that China also wants “to make a deal very badly.”

Precisely, a U.S.-China trade deal will boost Micron as its biggest customer is China. Beijing had lifted tariffs on some U.S. products amid trade tensions. Trump also announced a delay in implementation of higher tariffs on $250 billion of Chinese goods. Trump tweeted that tariff hikes from 25% to 30% will go into effect on Oct 15 rather than the previously scheduled Oct 1.

And how can we forget that the chip bellwether has been on fire ever since the flash memory specialist squashed fiscal third-quarter earnings estimates last month. To top it, the firm has raised its 2019, 2020 and 2021 earnings per share estimates. And now Goldman Sachs has upgraded Micron and raised its price target from $40 to $56. This new target is around 20% higher than current levels.

Goldman Sachs’ Mark Delaney said that “we are now more positive on global memory stocks. ... We believe that Micron’s stock will trade more on memory pricing trends and intermediate term EPS expectations than FY20 earnings.”

Analysts, thus, are bullish on the Micron stock. In fact, the company has seen its shares gain 55.9% so far this year, better than the Semiconductor Memory industry’s rally of 52.9%.


The Zacks Rank #2 (Buy) company also has an Earnings ESP of +7.64%. This is Zacks’ proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thus, Micron’s earnings will certainly tell us a lot about the fate of the chip sector in the upcoming earnings season.  For now, it looks good and should resonate well with chipmakers like Intel Corporation (INTC - Free Report) , NVIDIA Corporation (NVDA - Free Report) and Advanced Micro Devices, Inc. (AMD - Free Report) .

Intel, in particular, is benefitting from the rise in demand for its products, both in data center and client domains. Intel’s dominance in the PC market, strength in servers, and headway in process technology are a few positives.

Nvidia, by the way, is gaining decent market share in the gaming business. Growth opportunities in high-performance computing, AI and self-driving cars are also encouraging. Most importantly, its Advanced Micro Devices have been the best among the chipmakers for the last two years.

What’s more, Advanced Micro Devices is well-poised to gain from solid demand for its x86-based microprocessors, semi-custom chips and embedded processors.

Banking on such positives, Intel, Nvidia and Advanced Micro Devices are expected to come up with promising earnings results in the near term. Shares of Intel, Nvidia and Advanced Micro Devices have already gained 8.7%, 33.5% and 60%, respectively, so far this year. Take a look —


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