Micron Sets a New 52-Week High - Analyst Blog

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Shares of Micron Technology Inc. ( MU ) reached a 52-week high of $10.27 on Friday, Mar 22, 2013. Micron shares gained momentum following solid guidance provided in its second-quarter 2013 results announced the day before. Expected synergies from the much-awaited Elpida buyout could be another key driver. The closing price of the memory-chip maker on Mar 22, 2013, was $10.04, representing a robust 1-year return of about 21.7% and year-to-date return of about 51.4%. Average volume of shares traded over the last three months stand at approximately 29.1 million.

Moreover, this Zacks Rank #2 (Buy) company has a market cap of $10.2 billion and a long-term expected earnings growth rate of 12.7%.

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 chip maker 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 in the mobile DRAM space and it has already designed low power DDR2 chips for two of the top five smartphone makers.

Estimate Revision

Following the earnings release, the Zacks Consensus Estimates for 2013 and 2014 rose 2 cents each to 53 cents and 60 cents, respectively, in the past 7 days. Two and three estimates moved upward for 2013 and 2014, respectively.

However, only one estimate moved downward for 2013 in the past 7 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 the 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 Rambus Inc. ( RMBS ) and Cabot Microelectronics Corp. ( CCMP ) both with a Zacks Rank #1 (Strong Buy).



CABOT MICROELEC (CCMP): Free Stock Analysis Report

MICRON TECH (MU): Free Stock Analysis Report

RAMBUS INC (RMBS): Free Stock Analysis Report

SANDISK CORP (SNDK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ASP , CCMP , MU , RMBS , SNDK

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