Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.
$Micron Technology (MU.US)$The third quarter financial report will be released after the close of trading on June 26th EST. The market expects Micron Technology's revenue to be $6.668 billion, a year-on-year increase of 77.71%; expected earnings per share to be $0.30, while the loss per share in the same period last year was $1.73.
Given the overall recovery of the industry and strong growth in HBM market share, Micron's Q3 performance is likely to exceed expectations and provide stronger guidance. The supply and demand dynamics in the non-HBM segment may lead to surprising revenue growth.
The company previously stated that it will restore its ability to generate free cash flow profits. As of the close of last Friday, the stock price of Micron Technology has accumulated a 64% increase since the beginning of the year.
Micron Technology enters the AI industry.
Starting in 2024, Micron Technology is vigorously transitioning into the AI field and announced a development agreement with Nvidia in February. It is reported that Nvidia will use Micron's high-bandwidth memory chip (HBM) in its H200 chip.
According to reports, one of Micron's most famous AI chips, HBM3E, has already sold out most of its quotas in 2024 and 2025.
Micron Technology CEO Sanjay Mehrotra told analysts at the financial conference, "Micron has resumed profitability and achieved a positive operating margin one quarter ahead of schedule. As supply and demand balance tightens, Micron drives strong price increases."
Mehrotra also said, "Improvements in market conditions are the result of multiple factors, including strong demand for AI servers and reduced supply across the industry."
Tom's Hardware reported in May that "the price of HBM memory is expected to rise by 5% to 10% next year ... In addition, prices for other types of DRAM may also rise, with DDR5 expected to rise by 15% to 20%, as memory manufacturers shift the focus to HBM production."
This is largely driven by the surge in data center demand, which also supports demand for SSDs. Strong demand, NAND supply and demand rebalancing, and reallocation of production capacity to HBM result in higher price increases across the industry than previously expected.
Q3 expectations and investor outlook.
Micron is likely to provide very impressive performance and guidance this quarter. Sales growth is mainly due to continuous increases in average selling prices, so gross margin will expand. Capacity expansion also supports stronger guidance than expected.
The company's Q2 sales exceeded expectations by $300 million or 5.45%, and Q3 sales are expected to be between $6.4 billion and $6.6 billion. Considering CEO Mehrotra's statement that HBM capacity will be sold out before 2024, sales growth is expected to benefit from strong price increases. This is why recent reports of strong pricing power for memory have made the market more bullish.
As AI begins to spread to the edge, the tailwind for consumer electronics also begins to bring strong tailwinds to data centers. As more AI products emerge, more capacity will be dedicated to HBM. This will further exacerbate the supply and demand imbalance for NAND and non-HBM DRAM products, thereby supporting further price increases. In addition, Micron expects operating expenses to remain stable, so gross margin expansion will also translate into operating and net income expansion.
All signs suggest that Micron's performance this quarter is very strong and it is expected to achieve similar returns as the market has had on Micron this year.
Wall Street collectively raises expectations.
On June 17, 2024, several analysts adjusted their target stock price for Micron before the earnings release.
Bank of America Securities raised Micron's target stock price from $144 to $170 and confirmed its Buy rating. Bank of America Securities analyst said: Micron will become the main beneficiary of the high bandwidth memory (HBM) market share rise in cloud computing.
Cantor Fitzgerald analyst C.J. Muse also raised his target price for Micron from $150 to $180 and maintained an Overweight rating on the stock. Muse said he expected Micron's performance to exceed analysts' expectations and that HBM chips might bring new surprises.
In addition, Susquehanna raised Micron's target price from $143 to $185 and maintained a positive rating on the stock.
Many Wall Street institutions have raised their expected price for Micron, reflecting a bullish market sentiment towards AI and its related and extended industries, such as the memory chip industry where Micron is located.
Editor/tolk