With Micron Technology Inc.'s (MU) shares up 43% in 2017 and over 200% from their early-2016 lows going into earnings, the bar was certainly set pretty high for the memory giant. And considering the memory industry's historical volatility, it's tough to fault those who aren't enthusiastic about any outlook that falls short of the kind of blowout guidance Micron delivered in March.
That said, Micron's May quarter results and August quarter guidance provided little to be seriously concerned about. The company's numbers do suggest that the DRAM industry won't see the kind of massive price gains it witnessed during the first half of 2017 during the second half of the year. But they also suggest that DRAM and NAND flash memory supply growth remains controlled, and that demand is healthy ahead of a pending iPhone 8 and 7S ramp -- especially for some higher-margin products.
This column originally appeared on Real Money, our premium site for active traders. Click here to get great columns like this.
Micron reported May quarter (fiscal third quarter) revenue of $5.57 billion (up 92% annually) and adjusted EPS of $1.62 (up from negative $0.03 a year ago), topping consensus analyst estimates of $5.41 billion and $1.52. And in its earnings slides, the company guided for August quarter revenue of $5.7 billion to $6.1 billion (up 83% at the midpoint) and adjusted EPS of $1.73 to $1.87, above a consensus of $5.62 billion and $1.58.
Nonetheless, shares rose just 0.4% in after hours trading to $31.59. High expectations are clearly a factor here, just as they were for hard drive/NAND giant Western Digital Corp. (WDC) on Tuesday -- Western's shares slipped after the company hiked its June quarter EPS guidance, but left revenue guidance unchanged. There might also be some worries that Micron's margin guidance and earnings call commentary say about future price gains for DRAM, which accounts for 64% of Micron's revenue and about 70% of its gross profit.
The company's May quarter adjusted gross margin was 48%, at the high end of a 44% to 48% guidance range and up sharply from the February quarter's 38.5% and the year-ago period's 18.1%. But August quarter GM guidance of 47% to 51% implies only a 100 basis-point sequential gain at the midpoint.
When asked on the call about the margin guidance, CFO Ernie Maddock insisted his company "[continues] to view supply and demand in a favorable way." But he added that following several quarters of strong pricing gains, it "isn't always advisable to bank on continued aggressive quarter-on-quarter pricing increases."
Still, with Micron continuing to forecast that a consolidated DRAM industry will only grow its bit supply by 15% to 20% in 2017, there's little reason to think that pricing won't remain healthy in the near-term. Particularly -- though reported iPhone 8 production delays might affect August quarter demand a bit -- with Apple Inc. (AAPL) and other major mobile OEMs due to begin placing large DRAM orders for second-half smartphone launches. Micron's DRAM average selling price (ASP) rose 14% sequentially in the May quarter, and its bit shipments rose 5%. This followed 21% ASP growth and 1% bit growth in the February quarter.
Comments
Post a Comment