Micron Sets a New High, Shows Momentum
Shares of Micron Technology Inc. (MU) reached a new 52-week high of $13.50 on Jun 17, 2013. Micron shares gained momentum on the approaching Elpida buyout, solid guidance provided in its second-quarter 2013 results announced on Mar 21 and an expected improvement in memory pricing environment ahead.
The closing price of the memory-chip maker on Jun 17, 2013 was $13.24, representing a stellar 1-year return of about 122.9% and a year-to-date return of about 99.7%. Average volume of shares traded over the last three months stands at approximately 32.4 million.
Moreover, this Zacks Rank #2 (Buy) company has a market cap of $13.6 billion and a long-term expected earnings growth rate of 12.9%.
Growth Drivers
Industry trends indicate improving memory pricing environment. The price upside is mainly due to restricted supply by two large memory manufacturers, Micron and Samsung.
Analysts expect supply to remain constrained and hence memory pricing is likely to trend higher.
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.
During the last quarter, 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. However, the chip-maker 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 2 cents and 5 cents to 39 cents loss per share and 94 cents earnings per share, respectively, in the past 30 days. Four estimates each were revised upward in the last 30 days for fiscal 2013 and 2014.
Conclusion
We believe that the improved pricing and growing product demand will lead to a solid third quarter, results of which scheduled to release on Jun 19.
Other Stocks to Consider
Other stocks in the technology industry that are currently performing well and have a solid visibility include Aspen Tech Inc. (AZPN) and Pegasystems Inc. (PEGA), both with a Zacks Rank #1 (Strong Buy).
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Read the Full Research Report on MU
Read the Full Research Report on PEGA
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