What happened
Shares of Micron Technology (MU -3.78%) were down on Thursday following the release of quarterly results that were poorly received by Wall Street analysts. As always with this company, it seems investors are less focused on business results now and more focused on future uncertainties in the semiconductor space. As of 11:30 a.m. EDT today, Micron stock was down more than 5%
So what
For the fiscal third quarter of 2021, Micron's revenue was up 36% year over year to $7.4 billion. This was also up 19% just since last quarter. Moreover, the company's quarterly net income more than doubled from last year to $1.7 billion.
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However, profit growth isn't straightforward for Micron -- sometimes profits drop despite top-line gains. This is due to the delicate balance between supply and demand for the memory products the company offers. When there's an oversupply, prices drop. Therefore, Micron's profit margins are subject to current market conditions. This works against the company from time to time. But in the third quarter, overall shortages in the semiconductor industry helped boost Micron's bottom line.
And therein lies the rub with Wall Street. According to The Fly, an analyst with Summit Insights Group downgraded Micron stock from buy to hold under the assumption the semiconductor shortage will come to an end later this year. This implies that Micron's profit margins are about as high as they'll go, leading to lower profits in 2022.
Now what
For the upcoming fourth quarter, management is guiding for revenue of $8 billion to $8.4 billion and earnings per share of $2.13 to $2.33, according to generally accepted accounting principles (GAAP). At the midpoint of these guidance ranges, this represents 35% year-over-year revenue growth and 156% year-over-year EPS growth.
Lastly, it's noteworthy that Micron's plans officially will not include its 3D XPoint technology. The company sells DRAM and NAND memory products, but had started developing 3D XPoint as a hopefully better option. In March, however, the company announced it was discontinuing work on the project. The third-quarter financial report included the sale of its 3D XPoint facility in Utah to Texas Instruments for $1.5 billion, officially closing this chapter in Micron's story.
