Micron’s sales slumped. Its profits collapsed. Yet its stock price is at a 2019 high
Micron Technology Inc. expects soon to climb out of a sales slump driven by an inventory glut in the memory-chip industry.
The bottom is expected to come during the current quarter through the end of February, followed by a recovery, CEO Sanjay Mehrotra said during a Dec. 18 conference call with analysts after the company reported earnings for the first quarter of its fiscal year, which ended Nov. 28.
“Recent trends in our business give us optimism that our fiscal second quarter will mark the bottom for our financial performance, which we expect to start improving in our fiscal third quarter, with continued recovery in the second half of calendar 2020,” Mehrotra said.
Micron’s sales slumped. Its profits collapsed. The Boise chipmaker reported revenues of $5.14 billion for the first quarter of its 2020 fiscal year, down from $7.91 billion for the same quarter last year. Net income totaled $491 million, or 43 cents a share, compared with $3.29 billion, or $2.81 a share, a year earlier.
But the earnings didn’t stop Micron from scoring more points with investors. They showed faith in Micron’s ability to rebound by running up the stock price. Shares closed at $55.40 on Dec. 23, the highest all year through that date.
In 2019, Micron shares rose 67% through Dec. 18. Much of the growth has taken place in the past six months. During the same period, the S&P 500 index has risen 27% and the Nasdaq Composite Index has gained 33%.
“Our significantly improved competitive position, dramatically stronger product portfolio, structurally higher profitability and investment-grade balance sheet position Micron very well to drive long-term shareholder value,” Mehrotra said in a news release about the earnings.
Future sales increases are expected to be driven by the increasing availability of 5G cell phones, he told analysts.
“We are confident that 5G will be positive for both memory and storage content growth, as well as smartphone unit sales, and are encouraged to see the launch of affordable 5G phones with price points as low as $300 that feature a minimum of 6GB of DRAM,” Mehrotra said.
DRAM, short for dynamic random access memory, is commonly used in smartphones, personal computers and servers. Micron specializes in them and in NAND, or flash memory, chips, used in phones, USB drives and digital cameras.
The amount of memory found in 5G phones is significantly higher than that found in other smartphones, Mehrotra said. Micron, Mehrotra said, is “well-positioned” to supply DRAM as 5G adoption accelerates.
This story was originally published December 18, 2019 at 4:58 PM.
