Micron Technology Can Make a Comeback

Micron Technology (MU) shares have tumbled badly in 2015 after putting in a solid performance on the stock market last year. The company’s decline can be attributed to its weakening financial performance. For instance, in the third quarter, Micron had announced total revenue of $3.9 billion, down 3% from last year.

In addition, Micron declared third-quarter non-GAAP net income of $620 million, which was down 34% on a sequential basis.

The chip manufacturer reported a continued sequential decline in both its top and bottom line, primarily driven by the weakening sales numbers in the PC sector.
The sequential decline in revenue for the quarter was also due to a 10% fall in average selling prices of DRAM and constant DRAM sales volume. Micron reported combined gross margin for third quarter of 2015 of 31%, down 3% from the second quarter of fiscal year 2015 as a result of weaker average selling prices for DRAM, somewhat offset by reduced manufacturing costs.

Can a turnaround be expected?

Micron and Intel have started production on innovative class of non-volatile memory, developing the unique innovative memory segment in over 25 years. The innovative 3D XPoint technology delivers non-volatile memory speeds to about 1,000 times faster than NAND, which is believed to be well-known non-volatile memory at present in the market. The unique new technology allows for accelerated innovations in applications related to superior 8K gaming, real-time tracking of diseases and machine learning.

Going forward, Micron is estimating DRAM industry supply bit growth during 2015 in the mid 20s percent and for the fiscal year 2016 in the low to mid 20s percent range. The company currently forecasts DRAM aggregate demand during 2015 to be at or surpass supply. Micron estimates NAND industry supply bit growth during 2015 to be in the upper 30s and in the mid 30s for the fiscal year 2016.

The development of superior memory technology, which is much faster and lighter than the traditional NAND non-volatile memory storage technology is believed to drive improved customer demand and thus converges well with the company’s forecast about expanding future demand.

Micron jointly with Seagate recently developed and introduced the innovative SAS solid state drive family for data-intensive applications and which are workload-optimized for customers requiring seamless accessibility of their enterprise applications, like media streaming, financial transactions and data analytics.

In addition, Micron launched new M510DC SATA Solid State Drive (SSD), which is designed to substitute traditional hard drives in the fast expanding cloud applications space where data security and prompt read performance are important.

The quick development and introductions of innovative new storage solutions for enterprises is expected to drive significant customer traction and thus impressive top line growth for the company.


Thus, Micron seems to be making the right moves in order to pick up its performance going forward, which will allow the company to make a comeback. Additionally, the massive decline in the company’s stock price has made the stock a cheap investment as it has a trailing P/E ratio of 4.96. Thus, investors can consider going long Micron Technology as the company is capable of improving its financial performance in the long run.
Published on Sep 30, 2015
By Harsh Singh Chauhan

Copyrighted 2020. Content published with author's permission.

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