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Actionable news in MU: Micron Technology, Inc.,

Micron The MUney Maker

DRAM and NAND prices are rising.

Mark Durcan's guidance for next quarter is very conservative.

If you look past P/E, Micron is actually undervalued.

Micron is well positioned long-term and is on the forefront of innovation.

Micron may potentially be taken over.

Three factors that lead me to conclude that Micron (NASDAQ:MU) should beat earnings.

DRAM and NAND Prices Are Rising

Because of declining DRAM and NAND prices, which make up 91% percent of Micron's revenue (DRAM is 60% and NAND is 31%), Micron's revenue and earnings have drastically fallen. However, recently, DRAM and NAND prices have begun to stabilize and rebound. In June, NAND spot prices rose around 22% and DRAM spot prices rose around 11%.

(Nikkei Asian Review)

Further, DRAM and NAND prices should continue to rise because demand for both DRAM and NAND chips is projected to skyrocket in coming years.

And, while demand for DRAM and NAND chips will rise in the coming years, supply will be declining, meaning that prices will go even higher.


Going into this most recent quarter, investors thought that Micron would hit rock bottom at ($0.09) and return to profitability because of these increasing DRAM and NAND prices. Even though the company beat EPS by $0.01, the stock plummeted because CEO Mark Durcan announced that guidance for Q4 is between ($0.16) and ($0.24). Investors assumed that Micron had not turned the corner, and the stock rapidly dropped. However, in taking a closer look at the guidance for next quarter, Durcan is being overly conservative and is not factoring in the increase in DRAM spot prices.

While DRAM and NAND spot prices are rapidly rising, spot prices are not always reflected in the actual contracts. Even though it is probable that they are indeed reflected in the contracts, Durcan has decided to be conservative and not factor them in. In his opinion, and mine, it is better to have low guidance and a big earnings beat than high guidance and a big earnings miss.

Increasing Number of Bits Sold

In addition to rising DRAM and NAND prices, they are selling more and more units of each type of chip. While the media is making a huge deal about declining PC DRAM sales, mobile, enterprise, and server DRAM chips are surging. Last quarter, unit sales of DRAM chips increased 22% year-over-year, so the declining PC sales clearly are not hurting Micron's unit sales very much. The PC concerns are drastically overblown. DRAM bit growth is projected to be 28-30% over the course of this fiscal year and next fiscal year.. NAND bit growth is projected to be in the low teens because they are currently transitioning from NAND chips to 3D NAND chips. Not only will Micron be selling units at higher prices, but they will also be selling more units this coming quarter.


Because of its recent struggles, after releasing last quarter's results, Micron released a plan to...