Micron Technology (NASDAQ: MU) is in a very sweet spot. Thanks, once again, to NAND and DRAM prices, the company reported a blowout quarter. Demand for mobile, server, and SSD products gave the company another strong lift in quarterly revenue.
In the first fiscal quarter, Micron beat consensus estimates on revenue and on Earnings Per Share. Its forecast is even more impressive. Micron expects revenue of up to $7.2 billion, well-above the $6.21 billion consensus. It forecast earnings of $2.51 - $2.65 a share, compared to the $2.03 consensus estimates. But Micron trades at a ridiculously low P/E of around seven times. Its forward P/E is even lower at five times. With a PEG of just 0.25 times, the unresponsiveness in MU stock following its earnings report is puzzling. But the market does not price a company efficiently.
DRAM and NAND drive Micron’s growth. Industry DRAM supply will grow 20% but Micron is expecting to come in at below that. Industry NAND supply will grow 50%, where Micron expects its production coming in above that.
Takeaway
Markets are hesitant in bidding MU stock up too quickly. Samsung is and will always be a risk factor. If the two companies start a price war, profits will slip and the expected growth will need to come down.
