Will Next Week Bring Good News for Micron Investors?

Can Micron provide investors with more reasons with its next quarterly release?

Mar 25, 2014 at 3:00PM

Pricing and cost trends in the NAND and DRAM industry have been positive so far this year, while demand has remained strong. As such, it doesn't come as a surprise that Micron Technology (NASDAQ:MU) has continued its market-beating performance this year.

The Apple (NASDAQ:AAPL) supplier has also received a vote of confidence from David Einhorn's Greenlight Capital. So, it will be interesting to see if it continues to remain a good buy going into its second-quarter results, which are expected to come out on April 3 (according to Yahoo! Finance).

What's expected?
Micron doesn't release any guidance specifically, and this has lead to volatility in the past. However, given Micron's rich vein form and positive underlying factors in the industry, yet another outstanding performance cannot be ruled out.

The bar has been set very high this time as revenue is expected to jump 91% year-over-year to $3.98 billion and earnings are expected to jump to $0.74 per share from a loss of $0.28 last year. But then, since Micron has closed the Elpida acquisition, these numbers don't look out of reach, just like last time.

What could be next?
As I said above, Micron doesn't issue guidance numbers, but it isn't difficult to understand why the stock continues to be a solid pick despite 160%-plus gains in the last one year.

First, the dynamic random access memory (DRAM) industry is expected to chug along nicely in 2014. The global DRAM market is slated to rise 12% this year to $39.5 billion, and Micron's Elpida acquisition places it in the driver's seat to tap this growth. Micron is the second-largest player in the DRAM industry, behind Samsung, with 28% of the market.

Moreover, positive pricing trends in DRAM are seen going forward, with suppliers keeping inventories under control and the fire at SK Hynix's Wuxi fab leading to further supply constraints. The introduction of DDR4 this year will provide another boost to DRAM pricing. Micron was one of the first chip makers to sample its DDR4 solution to customers and chip partners. Since it commands a sizable share of the industry, it is in a prime position to profit from this new development.

In addition, the global mobile DRAM market has exploded in recent times, with the trend likely to continue going forward. TechNavio  believes that mobile DRAM will grow at an annual rate of 10.4% from 2013 to 2018, driven by their adoption in smartphones. This is another driving factor for Micron as Fool contributor Piyush Arora recently pointed out.

According to Arora, Micron is one of those suppliers that could benefit from a surge in iPhone sales. The iPhone 5c and 5s carry DRAM from Elpida, and Micron is leaving no stone unturned in landing the design win for the next generation as well. As mentioned above, Micron has already started testing its DDR4 memory, which is 60% faster and consumes 40% lesser power than DDR3. This is what will matter the most when Apple taps the DRAM supplier for its next iPhone(s).

If Micron does land the design win for the next iPhone(s), then it should see its addressable market increase since the Cupertino-based giant is slated to launch bigger-screen smartphones to appeal to Asian customers. In addition, Apple is rapidly increasing its reach by signing up more carriers, with CEO Tim Cook stating earlier this year that the company will bring 50 carriers on board across the globe.

NAND improvements and innovation
Looking at the NAND side of Micron's business, the growing adoption of solid-state drives (SSDs) is supposed to be a key growth factor. Micron reported a design win in this department on the last conference call, stating that it shipped its first 20-nanometer enterprise drive to a key equipment manufacturer. Its products have received acceptance from various other OEMs as well, and Micron is looking to strengthen this segment further by introducing a 60-nanometer client drive. 

Also, Micron's move toward a 20-nm DRAM platform is expected to enhance its margins, while also boosting adoption at the same time. Along with the move to a low-powered and more efficient DDR4 platform, Micron has placed itself in a solid position to deliver consistent earnings growth going forward.

The takeaway
Although the bar has been set high for Micron, the Elpida acquisition and its strong position in the industry make it possible for the company to at least meet estimates for the second quarter. And as far as the way ahead is concerned, there aren't many red flags that make Micron a risky investment right now. In fact, the stock trades at a trailing P/E of just 14, which is very impressive considering its robust earnings growth.

6 stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers