Micron Technology (MU) surpassed Wall Street’s expectations for its fiscal third quarter and exceeded expectations with its guidance late Wednesday. Know the prospectus of the company if you are planning to invest.
Micron Technology, Inc. (MU) is a memory and storage technology company that develops and manufactures products for use in personal computers, networks, data centres, and the automotive sector. The firm develops memory cards, discs, and infrastructure technologies under its several global trademarks.
Third Quarter of Fiscal Results 2021 and Stocks
In the fiscal third quarter, Micron’s profits increased by 129 percent to $1.88 per share, with revenues increasing by 36 percent to $7.42 billion. Micron was projected to earn $1.72 per share on $7.24 billion in revenue, according to analysts.
During our Third Quarter 2021 Financial Call today, we announced record-breaking revenue in #NAND and our embedded business. Get the full details here. https://t.co/gN618k67mo pic.twitter.com/gL6mlZmk17
— Micron Technology (@MicronTech) June 30, 2021
For the current quarter, the memory-chip behemoth guided upward. It’s also selling a chip factory for $1.5 billion to Texas Instruments (TXN), which includes $900 million in cash and certain tools.
Micron’s shares dropped 2% in extended trading. On Wednesday, MU stock gained 2.5 percent to 84.98, pushing over its 50-day line for the first time. Micron’s official purchase target is 97.06, but investors may get in early at 85.85.
Micron’s results and objectives are critical for chip-equipment companies that have a lot of memory exposure.
In other developments, Micron has agreed to sell its chip manufacturing factory in Lehi, Utah, to Texas Instruments (TXN). Micron will get $1.5 billion in economic value from the deal, which includes $900 million in cash from TI and roughly $600 million in value from chosen tools and other assets.
So far in 2021, Micron Technology’s (NASDAQ:MU) stock has lagged the wider market, but Wall Street expects the memory specialist to climb dramatically in the following year. Micron stock has a one-year price objective of $165, which is more than twice its present value, according to Rosenblatt Securities analyst Hans Mosesmann.
Mosesmann’s price objective does not appear to be excessively aggressive, which is excellent news for Micron investors. The chipmaker may easily achieve strong sales and earnings growth rates, giving the stock further potential. Let’s take a look at why that could be the case.
The demand for memory chips has increased since the beginning of 2020, owing to a variety of causes ranging from rising PC sales to a significant increase in 5G smartphone sales. Furthermore, data centre operators are increasing server storage capacity to cope with the increased strain resulting from more individuals working or learning from home.
Micron has reaped the benefits of this trend. After adverse memory market dynamics wreaked havoc on its sales and profit growth in 2019, it has rebounded remarkably. Its sales increased about 21% year over year to $12 billion in the first six months of fiscal 2021.
Micron’s net income has risen at a far faster rate, rising over 57% year over year to $1.4 billion in the first half of the year.
And Micron’s forecast indicates that things are going to improve. The business expects $7.1 billion in sales for the just ended third quarter, representing a 31 percent increase over the previous quarter. Micron’s expected Q3 earnings of $1.62 per share would nearly double from $0.82 per share a year ago, which is not surprising considering that its adjusted gross margin may climb to 41.5 percent from 33.2 percent.
The dynamic random-access memory, or DRAM, market accounts for the majority of Micron’s income. In the second quarter, it accounted for 71% of total revenues. According to market analysis, DRAM prices will continue to rise as demand continues to outstrip supply.
Finally, the transition to 5G wireless technology is already benefiting Micron’s mobile business. In the second quarter, Micron’s mobile business accounted for 29 percent of overall sales, up 44 percent year over year.
Future looks bright
Micron’s mobile business is poised for multi-year growth, as 5G smartphone sales are expected to skyrocket in the coming years. More significantly, 5G devices consume more memory than their 4G counterparts, allowing Micron’s memory business to grow at a faster pace.
Micron plans to earn an adjusted $2.30 per share on sales of $8.2 billion in the current quarter. In Micron’s fiscal fourth quarter, Wall Street expected earnings of $2.18 per share on revenues of $7.88 billion. Micron earned an adjusted $1.08 per share on sales of $6.06 billion in the prior year.
It won’t be unexpected to see the company follow suit and achieve Rosenblatt’s price target, thanks to all of the tailwinds outlined above that may help Micron quadruple its profitability over the next two years.