Micron (MU) is scheduled to report results of its fiscal second quarter after the market close on March 25, with a conference call scheduled for 4:30 pm ET. What to watch for:
1. Q1 EPS, REVENUE CONSENSUS LOWER: Along with its last report, Micron guided for Q2 earnings per share of 35c, plus or minus 6c, on revenue of $4.5B-$4.8B. At the time, analysts were expecting the company to report Q2 EPS of 41c on revenue of $4.78B, and those figures have since fallen to 37c and $4.68B, respectively.
2. KEYBANC CUTS PRICE TARGET: Yesterday, KeyBanc analyst Weston Twigg lowered his price target on Micron to $48 from $63 ahead of the company's quarterly results, though he maintained an Overweight rating on the shares. The analyst expects Micron to provide relatively positive commentary, reflecting good near-term pricing and demand trends as large datacenter customers stock up on memory and as PC demand spikes for work from home. However, visibility is very limited and Q3 guidance - if offered - could be below consensus to reflect uncertainty, while full-year supply and demand metrics could be withdrawn.
3. MORGAN STANLEY LIKES RISK/REWARD: Last week, Morgan Stanley analyst Joseph Moore kept an Overweight rating and $52.50 price target on Micron, contending that the risk/reward looks good, even though he acknowledges "more moving parts" than he has seen "in a long while." Moore said that the company's management "sounded outright cautious going into the quiet period" and has had an "appropriately conservative" view on the impact from the coronavirus pandemic.
4. COVID-19: The coronavirus outbreak has had a broad negative impact on the U.S. economy and many of its largest companies and industries, and the PC parts market has been no exception in that regard. In late February, TechCrunch reported that, according to research firm Canalys, the outbreak could lead to a drop of at least 3.3%, or as high as 9%, in the volume of PCs that will ship worldwide in 2020. The firm at the time estimated that that PC shipments would fall 10.1%-20.6% in Q1, and the impact will remain visible in Q2, when the shipments are expected to fall 8.9%-23.4%. Since that report, Micron's stock price has fallen from about $57 to just under $43 today.
Meanwhile, KeyBanc's Weston Twigg noted on March 11 that memory supply remains limited amid the outbreak, and Nomura Instinet analyst David Wong said on March 13 that the virus may create demand risk in the semiconductor space. Amid the uncertainty, Wells Fargo analyst Aaron Rakers last week cut price targets on several companies in the IT hardware and communications networking space. Rakers said it is impossible to know what the fundamental impact of COVID-19 will be across his coverage universe in the space, and that while he thinks it is very important to consider that many companies are materially different today than they were during the 2008-2009 financial crisis, most of his discussions are pointing to the fundamental deterioration of this timeframe as a guide post.