Micron stock rises after earnings, outlook easily exceed expectations

Micron stock rises after earnings, outlook easily exceed expectations

Outlook would be even stronger if computer builds weren’t being slowed by low supply of non-memory chips, CFO says

Micron Technology Inc. shares rose in the extended session Thursday after the memory-chip maker’s earnings confirmed that the industry is turning a corner.

Micron’s MU, +2.59% results and forecast topped Wall Street estimates, and shares rose 1.5% after hours, following a 2.6% rise to close at $79.11 in the regular session.

On the conference call, Micron Chief Executive Sanjay Mehrotra said he expects its sales to mobile, graphics, cloud and auto customers to grow stronger than average in 2021, while sales to PC and enterprise customers will be “somewhat less than the average.”

Micron specializes in DRAM and NAND memory chips. DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and servers, while NAND chips are the flash memory chips used in USB drives and smaller devices, such as digital cameras.

In particular, Mehrotra said cloud data centers figure heavily into the strong outlook.

“Cloud is the long-term secular demand driver for our industry and, again, it is the trend of AI and ML and the workloads that are requiring more memory,” Mehrotra told analysts on the call.

Micron expects adjusted fiscal second-quarter earnings of 68 cents to 82 cents a share on revenue of $5.6 billion to $6 billion, while analysts had forecast earnings of 67 cents a share on revenue of $5.55 billion.

The forecast for memory would be even stronger were it not for non-memory component shortages slowing end-user production, Micron Chief Financial Officer David Zinsner said on the call.

“These non-memory component shortages that some of our customers are experiencing, they relate to general tightness in the foundry space, logic, 8-inch, 12-inch nodes, where some of our customers and their end-market hardware are experiencing certain shortages,” Zinsner said.

Over the past quarter, companies like Intel Corp. INTC, +2.13% ; Nvidia Corp. NVDA, +5.78%, which makes graphics chipsets; and Advanced Micro Devices Inc. AMD, +5.35%, which makes CPUs and GPUs, have suffered from problems of high demand and short supply.

Micron reported fiscal first-quarter net income of $803 million, or 71 cents a share, compared with $491 million, or 43 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were 78 cents a share, compared with 48 cents a share in the year-ago period.

Revenue rose to $5.77 billion from $5.14 billion in the year-ago quarter. Analysts surveyed by FactSet had forecast adjusted earnings of 68 cents a share on revenue of $5.66 billion.

Leading up to the earnings report, analysts were pointing to a turnaround in the memory-chip market and upgraded Micron’s stock accordingly.

DRAM sales made up 70% of revenue in the fiscal first quarter, Micron said. Compute and network sales rose 29% to $2.55 billion, while mobile sales gained 3% for $1.5 billion in revenue for the quarter.

Over the past 12 months, Micron shares have gained 36%, compared with a 57% increase on the PHLX Semiconductor Index SOX, +3.86%, an 18% rise by the S&P 500 index SPX, +1.48%, and a 44% gain by the Nasdaq Composite Index COMP, +2.56%.

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