Micron Sets New 52-Week High

Zacks

Shares of Micron Technology Inc. (MU) reached a new 52-week high of $11.88 on May 28, 2013. Micron shares gained momentum on the approaching Elpida buyout and solid guidance provided in its second-quarter 2013 results announced on Mar 21.

The closing price of the memory-chip maker on May 28, 2013 was $11.78, representing a robust 1-year return of about 92.5% and year-to-date return of about 77.7%. Average volume of shares traded over the last three months stands at approximately 32.3 million.

Moreover, this Zacks Rank #2 (Buy) company has a market cap of $12.1 billion and a long-term expected earnings growth rate of 12.9%.

Mixed Bag Second Quarter Results, View Upbeat

Micron reported revenues of $2.08 billion, up 3.4% year over year and 13.3% sequentially. The quarter’s revenues came well above the Zacks Consensus Estimate of $1.91 billion. The improvement was mainly due to higher DRAM and NAND shipments as well as favorable supply/demand scenario.

Gross margin expanded 710 basis points on higher volume sales of NAND flash and DRAM chips as well as lower cost of production. Operating margin was (1.1%) versus (10.2%).

Micron reported loss per share of 28 cents, which was better than the year-ago quarter results but wider than the Zacks Consensus Estimate of 20 cents loss per share. The loss was mostly due to lower average selling price (ASP), lackluster PC demand and macro uncertainty, slightly offset by higher sales volume.

Guidance

Micron did not provide any specific guidance for revenues or earnings. But it mentioned its optimism for the end markets such as mobile, server, networking enterprise and embedded based on strong demand for its memory chips. Micron is also confident of witnessing supply/demand balance for DRAM and NAND memory chips in 2013 and 2014. The chipmaker expects industry-wide DRAM wafer capacity to get reduced, which will bring down supply, ultimately boosting ASP. For NAND, Micron is confident about growing demand due to increasing use of solid state drives in smartphones.

Micron also stated that it is focusing more on the mobile DRAM space and it has already designed low power DDR2 chips for two of the top five smartphone makers.

Estimate Revision

The Zacks Consensus Estimate for 2013 and 2014 rose 3 cents and 6 cents to 41 cents loss per share and 90 cents earnings per share, respectively, in the past 30 days. One estimate each was revised upward in the last 30 days.

Conclusion

Despite another quarter of loss due to PC market overhang, macro backdrop, soft DRAM and NOR prices and flat NAND prices, we remain encouraged by management’s upbeat view on DRAM and NAND market fundamentals. We also believe that tight expense control, manufacturing efficiency and secular shift toward mobile DRAM will benefit Micron’s fundamentals in the coming quarters.

Apart from this, the soon-to-be completed Elpida acquisition will help Micron to gain memory market share, which is mostly dominated by SanDisk Corp. (SNDK). Micron will also be able to save roughly $400.0 million on the purchase price, given stronger dollar value against yen.

Other Stocks to Consider

Other stocks in the technology industry that are currently performing well and have a solid visibility include Aspen Technology Inc. (AZPN) and Pegasystems Inc. (PEGA) both with a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on SNDK

Read the Full Research Report on MU

Read the Full Research Report on PEGA

Read the Full Research Report on AZPN

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