Micron is still 'trending in the right direction': Analyst

Micron Technology (MU) reported fourth quarter earnings, surpassing expectations on the top and bottom lines. However, the company's weaker-than-expected outlook disappointed investors, triggering a downturn in the semiconductor sector and dragging chip stocks lower in Thursday's trading session.

CFRA Research senior industry analyst Angelo Zino and Bloomberg Intelligence analyst Jake Silverman join the Morning Brief to dissect these results and their implications.

Zino attributes the muted reaction in Micron's share price post-results to the "beat and raise" scenario that unfolded last quarter. He notes that there was "a little bit of an expectation" for another impressive performance this time around. Despite falling short of these lofty expectations, Zino highlights strengths in areas such as pricing and margins. "Overall, it's somewhat of a mixed picture, but Micron is... trending in the right direction here," Zino told Yahoo Finance.

Despite the underwhelming results, Silverman maintains that Micron's "fundamentals remain pretty positive." He expresses optimism about the company's AI-related growth potential, even though it wasn't evident in this quarter's results. Silverman emphasizes that AI integration is still in its "early stages" at Micron, suggesting that the semiconductor company stands to be "a particularly strong beneficiary" of the ongoing AI boom.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Angel Smith

Video transcript

Let's take a look at Mikron because shares are in the red this morning on the back of its earnings print despite beating the street's Q three expectations driven by demand for its A I chips.

Mike's Q four guidance overshadowing those results.

The chip makers revenue guidance is in line with expectations.

Ultimately, though investors are viewing that as a huge disappointment, the stock has been on a tear though since the start of the year and taking a look at those year to day gains up nearly 67% with a deeper dive into these results.

And ultimately, what it tells us about the A I excitement we wanna bring in Angelo Zino, he's Cfras, a research analyst along with Jake Silverman Bloomberg intelligence analyst, great to see you and have both of you.

Angela.

Let me start with you in terms of the street's reaction here, we are seeing uh pressure on Mike Ron shares is that the right read of this report because there does seem to be a lot of antidotes and a lot of data points to be excited about in this print.

Yeah.

Now, so a as far as kind of you know, the reaction to the stock price here, I mean, fairly muted in nature and, you know, maybe rightfully so, I mean, you kind of saw, you know, what they did last quarter and it was kind of a nice beaten raise on both kind of the top and the bottom line side of things.

I think going into the print here, there was an expectation out there from the street that, um, you would again see kind of a very nice beat and raise, raise type quarter.

You didn't necessarily get that specifically on the top line side of things.

But that said, you mean you did get a lot of kind of um good items and that we did see, I mean, pricing uh looked very good on both the D rent and then side of things um increasing about 20% sequentially on both side of things, margins look like that, you know, they're holding up fairly well.

Um And, you know, the improving the trajectory looks pretty good on that side of things.

But, you know, I think the other thing maybe holding up the street a little bit is also kind of the Capex guidance side of things.

Um You know, the good thing is that they kind of threw it out there now.

And uh we now, you know, we now have that unknown kind of thrown out there for 2025.

And, you know, you're looking at mid thirties type of Capex uh or capital intensity rate going into next year probably compares to about 32% here this year.

So it's gonna grow faster than revenue next year.

But that should be expected because of the the growth opportunities there related to high bandwidth memory.

Um So overall, you know, somewhat of a mixed but you know, Mike is kind of trending in the right direction.

Here, Jake, I want to get your reaction as well here.

I mean, the company is talking about being able to drive robust price increases, industry, supply demand conditions continue to improve, rapidly growing A I demand, enabling to grow their revenue by over 50% in this most recent quarter.

I mean, what what is the read through?

Especially if things are as mixed as investors and analysts like Angelo are saying this morning?

Yeah.

So overall, I mean, we we believe that the fundamentals remain pretty positive.

We're still remaining pretty optimistic on A IA I is actually a pretty, you know, early stages for microns, specifically, they supply HBM into Nvidia's H 200 they're going to expand into other customers as well as potentially additional products within Nvidia's A I portfolios such as their Blackwell Gpus.

So, you know, overall, we don't think this is specific of read through over in into A I itself as long as hyperscale Capex continues to increase quarter to quarter and there's potentially some upward bias there as well.

We remain pretty optimistic overall on A I spend.

And we believe that Mike is going to be a particularly strong beneficiary of this.