Although this semiconductor company saw falling revenue last quarter, its earnings beat estimates by five cents. Now, the company is changing its focus to high-growth segments, making its shares more attractive.
Micron Technology Inc. (MU)
From Technology & Opportunity
Micron Technology Inc. (MU) is best known for producing many forms of semiconductor devices. This includes DRAM, SDRAM, flash memory, and SSDs. Its consumer products are marketed under the brands Crucial Technology and Lexar.
The company was named one of the Thomson Reuters Top 100 Global Innovators in 2012 and 2013. It is ranked among the top-five semiconductor-producing companies in the world.
It’s long been our thesis that the market was underpricing Micron and headwinds had already been well baked into the stock. Analyst estimates were so ugly that it was virtually impossible for Micron to disappoint, and fourth-quarter results certainly support this idea.
For Q4, Micron reported what look like ugly figures on their own: revenue fell 15% year-over-year to $3.6 billion, computing fell 31%, storage fell 6.5%, and DRAM pricing dropped 7%.
Gross margin also slid to 27%, down from 33% a year prior.
But wouldn’t you know—since the call, Micron’s stock has rallied nearly 25%. Why? Because even with this very tepid quarter, the market has realized its previous fears were overblown. Besides trouncing analyst estimates on the bottom line, Micron announced it will be shifting its capacity away from PC towards high-growth segments including mobile, automotive, and enterprise storage. With the main concern regarding Micron being declining PC sales, the market was more than happy to get some more color on the company’s impending pivot.
Jason Stutman, Technology and Opportunity, www.angelpub.com, 877-303-4529, October 2015