MU Earnings Continue Bullish AI Memory Demand, Analysts Back Bull Case

Good morning, trade live. Let's focus on the cha for micron. Given we've just had earnings yesterday smashed it. We are down though 2.5% right now. Obviously we've seen this triple digit rally year to date. We hit the peak in November June I should say. We have very much been trading somewhat sidewa into this print. There's been a lot of debate around the AI trade in the last couple of mons we've seen that rotation back into the Mag seven. But let's talk about this quarter result and today's reaction, because that is tus of the morning trade. J us for a closer look is Molly as always. Good morning Molly. As you and I we breaking down these numbers. I mean it was a v interesting reaction. You just wondered exactly if anything, what the minor blemish w why the markets wer trading higher at that point. But now we've had time to digest it. We've had the call. Wad the analyst reaction. What are you seeing, Sam? It's a lot of what we weking at yesterday. A couple mentions of maand just a hair of compression there. Concerns about CapEx. Not any major flags, but just little things being very nitpicky when comes to this report. And so we continue to see now we've taken a decisive move to the downside, but not nearly as significant as what the options market was pricing in, which was a little bit north of 7%. But let's walk through the numbers here. I mean, they beat on earnings. They issue strong guidance. They saw their d center revenue jump 11 fold as they continue to benefit from increased demand for AI infrastructure. Their earnings per share came in at 3342 versus the 3161 that was expected. Revenue was almost quadrupled fm the fourth quarter of the pre year. It came in at $54.23 billion. The street was looking for about $51 billion, so considerably better than expected. As far as what we're looking at in ter guidance, they expect revenue of about $61.5 billion. So more increase. Their earnings per share will jump to $38.15. That's thepectae metrics also beat analyst ations. Their stock is up 50 this year. A lot of that driven by these memory prices and the memory shortages, their Dram r in the quarter alone increased more than 340% from a year ago, up to $39.8 billion. That's about 7,373% of total sal overall. The CEO also commented that the company is working with Nvidia on the industry first custom HBM implementation, so anothertenti. And as we look at the investment, that CapEx was another concern here. As they said they do plan to spend more. They'r investing billion to build two new campuses for maki HBM. They broke ground in New York in January on one. They also have a new in Boise Idaho that's scheduled to come online next yea And as far as their projections, at least for the fiscal first quarter, they're expecting $11.5 billion in terms of CapEx spend. The first halff fiscal 27 is looking to be about $25 billion. But they sat the spending for the second half is expected to be even higher than the first. So I think perhaps maybe some concerns there. But analysts Goldman keeping a neutral rating. They're keeping an $1,100 price target right now we're about 1040. They say that they expect the stock to move modestlyigher following a quarter. And guidance that were well above estimates despite a sfall on gross margin guidance that was set against elevated investor expectations. So again, there's that mention of guidance. They also say investors expect it to focus on potential u to the CapEx outlook. We've got JP Morgan coming out reite their overweight rating. They have a $1,540 price target, saying the company delivered a decisive beat and r quarter. They like their upg view on supply and demand tightness. They say they confirmed a near certain capital return pivot, and they say they have a strong multiple year earningser narrative going from here. Morgan Sta says that over the last three quarters, they had beaten guided ahead of the consensus on EPS by 20 to 40% last night. They only beat by 5% and guided by 6% above the consensus, which may b the new normal for Micron' visibility going forward. They keep an overweight rating and a $1,200 price target, and Gabelli Funds put out a note this morning saying it was another strong beat and raise, but said at this point I have not heard any negative data ppointing to a memory cycle reversing toward a decline anytime soon for the foreseeable future. So a lot of questions about visibility, about the durability of this memory demand cycle, which overwhelmingly seems to be holding up if yo looking at the analyst notes. Sam. Yeah, absolutely. Trading down 2.3 right now. Really appreciate the details. Molly And the analysts reaction. Let's trade it now with Joe Teague, a portfolio manager ofhe rational Rational Equity Joe good morning to you. How you approach an example trade on this one. Yeah good morning. What a great report. A really good review there from Marley. Fantastic earnings. Fantastic company 500% year to date just rocking and rolling. But I think maybe some of that easy money has been made already in theny. Don't expect another 500% ret year to date this time next year. I'm more thinking of just a continual gradual return. So just because it's had a fantastic return recently doesn't mean it still can't make all time highs. I'm just not betting on it to to accelerate as rapidly as it has recently. So a fantastic company, a fantastic future. Now, the market itself I think is kind of dealing with this tug of war. I having really good economic data. But that means that inflations likely going to remain high and rates are goo remain high, really seeing rates going higher and higher. And I think the market would love to see that t Stop Oil Playing being the wild card in that scenario. So having all that, I think micron is kind of getting caught up with the market today in spite of their fac earnings. I do think as soon as maybe you see oil calm down, as soon as as s as at some point rates stop going higher. I think the market will catch a bid. Specifically, the greatest companies like micron will catch a bid. So I'd be looking for it trn to form. And I'm buying this dip. I'm going call, looking all the way out in to March. Just going to look to sell the 1400 call in March. Right now we're at about 1040, 1030 in in micron. So a lot ofrn o capture going to take in premium to cushion my downside while I'm doing it. All right. And actually just taking a l at the semiconductor chip space right now. We're seeing a bit The Sox has actually picked up to the green. We're seeing micron comingff the lows. Now. We're seeing that across the memory space too. So let's see. I mean the day is young guess you could still say it. Joe thank you so much for that. Really