How Micron Technology Soared to 5-Year Highs

On Wednesday, Micron Technology (NASDAQ: MU  ) will release its latest quarterly results. After years of struggling through tough conditions in the memory-chip space, Micron has finally made investors happy, with its stock rising to levels not seen since before the stock market's 2008 meltdown.

The problem that Micron has often faced in the past, though, is that brief periods of positive sentiment have given way to downward cycles in demand for memory chips, making it difficult for the company to make any permanent headway. But could this time finally be different for the company? Let's take an early look at what's been happening with Micron Technology over the past quarter and what we're likely to see in its report.

Stats on Micron Technology

Analyst EPS Estimate

$0.02

Year-Ago EPS

($0.32)

Revenue Estimate

$2.24 billion

Change From Year-Ago Revenue

3%

Earnings Beats in Past 4 Quarters

0

Source: Yahoo! Finance.

Can Micron Technology's earnings finally make investors happy?
In recent months, analysts have gotten more optimistic about Micron's earnings prospects, reversing initial calls for a quarterly loss and narrowing their full-year fiscal 2013 loss estimates by more than a dime per share. The stock has exploded higher in response, weighing in as one of the S&P 500's top performers of the year and climbing nearly 35% just since mid-March.

Micron started off the quarter on a largely positive note, posting fiscal second-quarter results that included impressive sales growth and better gross margin figures. Revenue from its PC-related DRAM memory surged 24% as the company managed to reduce inventories of the low-margin chips, while the NAND memory that gets used more in mobile technology rose 8%. As the company has been able to reduce its production costs, Micron stands in a better competitive position than it has in the past.

The problem, though, is that Micron needs to boost its prospects if it wants to stand up to its competition. Use of flash memory and solid-state memory drives has greatly increased demand for memory generally, and rivals are working hard to make their own inroads into trying to maximize that demand as long as it lasts. SanDisk (NASDAQ: SNDK  ) has not only come out with its own solid-state drives but has also teamed up with hard-disk drive giant Western Digital to produce hybrid solid-state hard-disk drives that combine the benefits of solid-state memory with the cost-effectiveness of traditional hard drives. Even Rambus (NASDAQ: RMBS  ) has soared to almost two-year highs thanks to a recent victory in getting SK Hynix to settle a patent dispute with the company, helping Rambus to ease the sting of having lost its major suit against Micron last year.

The big prospect for Micron to push higher should come when it closes on its long-awaited acquisition of bankrupt DRAM-maker Elpida's assets. The move should help Micron stand up to giants in the industry like Samsung and Hynix, especially on the mobile side of DRAM, where Elpida has some lucrative relationships to supply memory for popular products like the iPhone and iPad. Micron has waited more than a year for the buyout to be complete, but with signs that the companies are overcoming legal hurdles, it's looking more likely that it will finally happen.

In its quarterly report, watch for Micron to give the latest update on its Elpida acquisition. Even with good times in the memory business, investors have seen the cycles in the industry move up and down too many times to put much long-term stock in the recent upswing without more fundamental signs of strength for the company.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Click here to add Micron Technology to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2492697, ~/Articles/ArticleHandler.aspx, 12/19/2014 9:40:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement