Shares of Micron Technology (MU 0.17%) stock plunged 11.1% in Friday trading to close the day at $443.21. Surprisingly, this plunge came after Micron reported Thursday that it had beaten earnings expectations -- not missed them.
Micron reported a fiscal Q4 2019 profit of $0.49 per share, as calculated according to generally accepted accounting principles (GAAP), and said its "non-GAAP net income" was $0.56 per share, ahead of Wall Street's predicted $0.49 pro forma profit. Sales of $4.9 billion likewise exceeded expectations for sales of $4.6 billion.
That's the good news; now here's the bad. Sales may have exceeded expectations but were still down a whopping 42% from fiscal Q4 2018 levels. Profits for the quarter declined a staggering 86% from the $3.56 per share (GAAP) earned last year.
What really seems to have upset the market today wasn't the decline in earnings year over year, and certainly not the fact that the decline was smaller than anticipated -- it was the guidance for what to expect in fiscal Q1 2020, currently underway.
Micron management warned that sales in Q1 will probably be in the neighborhood of $5 billion (plus or minus $200 million), with GAAP profits of $0.42 per share (plus or minus $0.07) and non-GAAP profits of $0.46 per share (also plus or minus $0.07). Wall Street analysts, however, had been forecasting lower revenues ($4.8 billion) but higher profits of $0.48, pro forma.
Seemingly, it's this prospect of Micron beating on sales but earning lower profit margins on those sales and, accordingly, earning less profit that sparked today's sell-off. If that's the case, however, then I'd just suggest the strength of Micron's sales is perhaps the more important number to focus on, and the possibility -- not certainty -- that Micron might potentially "miss earnings" by a couple of cents is nothing to panic over.
At a lowly five times trailing earnings, Micron stock still remains a really, really cheap tech stock.