Skip to Content
Stock Analyst Update

More Good News to Come From Micron?

This firm should be able to take part in more appealing end-markets such as enterprise solid-state drives while enjoying superior cost metrics.

Mentioned:

 Micron (MU) reported impressive fiscal third-quarter results, driven by a strong pricing environment that is expected to persist for the remainder of the year. While favorable DRAM average selling prices stemming from tight supply bolstered the firm’s results, we reiterate our positive thesis on Micron’s 3D NAND offerings codeveloped with Intel. Micron is ramping its 2nd generation 3D NAND offerings, with meaningful output expected by the end of fiscal 2017. This should enable the firm to take part in more appealing end-markets such as enterprise solid-state drives while enjoying superior cost metrics. We are increasing our fair value estimate modestly to $28 per share from $26 as we incorporate stronger near-term expectations. However, we caution prospective investors to seek a wider margin of safety, as this no-moat stock has already risen over 130% over the past 12 months.

Third-quarter revenue grew to $5.57 billion, up 20% sequentially, led by a 25% gain in server DRAM sales, a 30%-plus increase in SSD revenue, and record quarterly revenue from the embedded business unit (which features automotive, consumer, and industrial end-markets). DRAM sales rose 20% over the prior quarter to $3.56 billion, with the aforementioned server gains partially offset by declines in PC DRAM. We were pleased to see SSD sales to cloud and enterprise customers exceeding client SSD sales, as the former generally boast higher capacities and ASPs. Gross margins rose to 46.9% from 36.7% last quarter, as Micron enjoyed strong bit growth in NAND, ASP increases in DRAM, and cost per bit reductions in both DRAM and NAND.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.