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Memory chip maker Micron reported stronger earnings after the close Wednesday. Both business lines, DRAM and NAND memory chips exceeded forecasts. $AMD has been trying to recover from near their six months lows with the technology selloff.


micron dram

Micron Dram Wafer, Bullish Demand and Prices for 2021?

Micron Technology, Inc. NASDAQ: MU Reports Earnings After Close Wednesday

$0.93 EPS Beat $6.23 billion forecast in revenue

Earnings

Micron reported second quarter fiscal 2021 results after the bell and had a conference call at 4:30 p.m ET

Micron Technology reported fiscal second-quarter net income of $603 million with a profit of 53 cents per share. Earnings, adjusted for non-recurring costs and stock option expense, came to 98 cents per share. The report beat Wall Street expectations. Projected EPS: 93 cents, according to FactSet. Analysts surveyed by Zacks had forecast adjusted earnings per share of $1.23.

MU posted revenue of $6.24 billion in the period, also beating Street forecasts. The company said it expected revenue in the range of $6.9 billion to $7.3 billion for the fiscal third quarter. Analysts surveyed by Zacks had expected revenue of $6.68 billion.

Micron shares have increased 18% since the beginning of the year, while the S&P’s 500 index has increased roughly 6%. In the final minutes of trading on Wednesday, shares hit $88.63, more than doubling in the last 12 months. 

Analysts had expected the shortage of semiconductors to give Micron a bottom-line boost, not only in the company’s second fiscal quarter but in the current quarter and maybe even the next one.r guidance on world

Micron shares have been struggling recently with higher interest rates affecting growth perceptions with customers in the cloud, graphics and enterprise market. The opening economy may see revenue growth in the graphics and datacenter market adversely impacted by lower-than-new normal demands in gaming cards but offset by cryptocurrency-related demand. Bitcoin prices have risen 5 fold trippled in the past year, Bitcoin coin has bounced from $3,000 to $60,000 in just over a year. This should garner some positive guidance numbers in that area.

Shares trade at 18x expected 2021 EPS and about 9x estimated 2022 and 2023 earnings. Over the last 12 months, Micron has nearly doubled in value while the tech sector is up by about two-thirds. The stock’s 52-week range is $39.33 to $95.75.

The Biden administration has continued to blacklist Huawei amid the trade war between the U.S. and China, effectively halting its ability to purchase American-made chips and forcing U.S. companies such as Micron to cut ties with the Chinese giant.

Micron Technology, Inc. NASDAQ: $MU

Market Reaction Pre Market 92.31 +4.09 (4.64%)

Highlights

MU Q2 Earnings

AMD has adapted from China being the prime revenue driver for the company, accounting for over 50% of its topline in the past. While it does not make semiconductors in China, numerous assembling and packaging works take place in the country. Therefore, Trump’s tariffs, which were be raised from 10% to 25% by the end of 2019 have dent Micron’s gross margins by at least 50 BP at the time..

$MU has forced to shift at least a part of its Chinese operations to assembly plants in Singapore. Micron results were driven by strong demand for its DRAM and NAND chips across markets 

CapEx

The company said it plans to invest about $9 billion in capex in fiscal 2021.

“I think it is important to understand that we do remain disciplined with respect to capex,” said Micron Chief Executive Sanjay Mehrotra on the call. “We want to make sure we manage it prudently.” Mehrotra added that the $9 billion earmarked is “really almost the highest capex that the company has spent in its history.”

Outlook (via CC)

In DRAM, due to the stronger demand, we now expect calendar 2021 bit growth at 20%, above our prior forecast of high-teens. This growth builds on calendar 2020 bit growth, which was in the lower 20% range. As a result of disciplined capex investments since the start of the pandemic, we expect industry DRAM supply to be below demand. As a result of the strong demand and limited supply, the DRAM market is currently facing a severe undersupply, which is causing DRAM prices to increase rapidly. We see the DRAM market tightening further through the year.

In NAND, we now expect calendar 2021 bit growth in the low to mid 30% range, above our prior expectation of 30%. While we are seeing stabilization in near-term pricing, the elevated levels of industry capex are a cause for concern, and more capex cuts are needed to allow for healthy NAND industry profitability. Long term, we expect a DRAM bit demand growth CAGR of mid to high teens and a NAND bit demand growth CAGR of approximately 30%UPDATE: A Wall Street Journal report that Micron is exploring a deal to buy Japanese chip maker Kioxia.

Micron Technology Inc. MU  and Western Digital Corp. WDC are each exploring a potential deal for Kioxia Holdings Corp. that could value the Japanese semiconductor company at around $30 billion, according to people familiar with the matter, as a global scramble for memory chips used in smartphones and other devices heats up.

A deal for Kioxia , controlled by private-equity firm Bain Capital, isn’t guaranteed, and it isn’t clear how one might be structured. Should a deal come together, it could be finalized later this spring, some of the people said. 

The Tokyo-based company had been planning an initial public offering before shelving it in late September, citing the coronavirus pandemic and market volatility. An IPO later this year is still a possibility should the company fail to reach agreement on a deal with one of the suitors, the people said. Kioxia, formerly part of Toshiba Corp. and known as Toshiba Memory, was purchased in 2018 by a group led by Bain that included Apple Inc. AAPL, 0.93%, Dell Technologies Inc. DELL, +0.50% , Kingston Technology Co. and Seagate Technology PLC STX, 1.64%, in a deal worth around $18

DRAM Production Expansion a Risk or Opportunity?

Micron expansion of additional clean room spaces in Singapore and Japan. The new Japan space was online for production at the beginning of 2019, with Singapore online at the end of 2018. This was all before the cryptocurrency price rebound and WFA chip exposion which has led to a chip shortage. AMD was able to benefit massively from this in the past year.

The hope for the tech giants is the demand for DRAM chips can can ahead ahead of supply with new technology and markets.

That is the risk and the price losses ahead of this report.

Source: Micron,

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