Although Micron is up over 35% year to date, it gave back gains going into earnings and is continuing to sell off after earnings. Much of its run-up this year has come during a time of uncertainty for global equities and that sentiment has not changed. Therefore, further analysis is needed to understand the sell-off, and what to do today.
Q2’18 revenues increased by 58% Y/Y, net income margin expanded by 500bps, EPS increased 227% Y/Y, P/FCF is at 7.62 with FCF increasing 23% from previous quarter. ROIC for this quarter came in at 57%.
Additionally, the industry is experiencing macro tailwinds as management is confident that industry wide memory-chip demand will outpace supply this year. Currently DRAM bits will experience 20% demand growth in 2018. NAND has been a drag on performance but 71% of Micron’s revenues come from DRAM sales. Revenues are expected to grow at 30% while operating margins are expected to stay the same.
Perhaps the stock is being selling off due to MU providing disappointing guidance, as interpreted by financial media. Management has hinted that memory-chip prices should continue to decline. Following the earnings release, Citi cut their forecasts to neutral on the stock. However, maybe it’s time to be contrarian?
Submitted March 23, 2018 at 11:01AM by QuantalyticsResearch http://ift.tt/2HZfGxR
