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Memory chip maker Micron reported better than expected earnings after the close Tuesday but lowered guidance sending $MU 4% lower. Strong DRAM bit shipments for the cloud, graphics, PC and notebook, 5G and automotive markets was anticipated.

Micron Memory

Micron DRAM memory density

Micron Technology, Inc. NASDAQ: MU Report Earnings After Close Tuesday

$2.33 EPS Forecast and $8.23 billion forecast in revenue

Earnings

  • Micron Q4
  • Adj - EPS $2.42, Est. $2.34
  • Rev $8.27b, Est. $8.23b -
  • Cash Flow From Opeartions $3.88b, Est. $4.05b

“In fiscal 2021, we established DRAM and NAND technology leadership, drove record revenues across multiple markets, and initiated a quarterly dividend. The demand outlook for 2022 is strong, and Micron is delivering innovative solutions to our customers, fueling our long-term growth,” said Micron’s CEO Sanjay Mehrotra.

Lowers Q1 guidance

  • Sees Q1 revs $7.65B plus/minus $200M vs. est. $8.57B;
  • Sees Q1 EPS $2.00 plus/minus $0.10 vs. est. $2.56;
  • says demand outlook for 2022 is strong

 

Market Reaction: Micron Technology NASDAQ: MU After hours 69.68 −3.42 (-4.68%)

Highlights

MU Q4 2021 Earnings

 

Earnings Preview

  • Q4 2021 after the bell;
  • Conference call scheduled for 4:30 p.m.ET
  • Projected EPS: $2.33 Projected revenue: $8.23 billion

Micron is well off it's high of $95.59 trading at $74.05 Friday after three different firms warned of looming disappointment.

Positives

Remote-working and online-learning trend amid the coronavirus crisis stoked demand for cloud storage and usage of online and e-commerce services globally, compelling data-center operators to enhance their capacities in order to accommodate the demand spike for cloud services. All these factors are likely to have aided Micron’s top line during the quarter under review.

A solid uptick in the DRAM bit shipments for the cloud, graphics, PC and notebook, 5G and automotive markets is anticipated to have been a positive during the quarter to be reported.

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.

Negatives

Micron’s heavy dependence on China is a headwind due to the ongoing trade war between the United States and China. Restrictions on exports to Huawei might have hurt top-line growth of the memory chip maker.

A higher mix of lower-margin NAND, coupled with low memory prices and minimal decline in manufacturing costs, is expected to have strained margins.

Higher prequalification and labor expenses are likely to have negatively impacted Micron’s fourth-quarter bottom-line performance. During the fiscal second-quarter conference call, the company noted that it expects a rise in operating expenses during the second half of fiscal 2021 due to the higher prequalification and labor expenses. 

Operating expenses are expected to have flared up during the fiscal fourth quarter due to the resumption of the previously-delayed fiscal 2021 salary hikes in the fiscal third quarter. This might have hurt the company’s margins and profitability during the quarter under review.

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.

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 waS 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

About Micron

Micron Technology is a world leader in innovative memory solutions that transform how the world uses Information. Through our global brands — Micron, Crucial and Ballistix — we offer the industry’s broadest portfolio, and are the only company that manufactures today’s major memory and storage technologies: DRAM, NAND, NOR, and 3D XPoint™ memory

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