Micron Technology (NASDAQ: MU) did it again. The company reported exemplary quarterly earnings, justifying a higher valuation and multiple analyst upgrades. While the $100+ price target is achievable, Micron’s weaker guidance may limit that upside.
Micron broadened its portfolio of high-value solutions in the fourth quarter, driving profits higher. Record revenue and profits, such as the doubling in high-value mobile NAND, added enough cash flow (of $2.2 billion) to support an aggressive capital return program. This will include paring down debt, which stood at $7.3 billion at the end of Q3. In Q3, Micron cut debt by around $2 billion. It expects to cut debt by another $2 billion in FQ4/2018. By FY2019, Micron will move from debt reduction to capital returns by buying back shares.
The day after its earnings report (June 22), the stock actually fell and closed lower, despite the increasing fundamentals. Bulls will have to decide if the downtrend lasts. China is accusing Micron, SK Hynix, and Samsung of price-fixing. But chipmakers are battling back, accusing China of stealing IP.
Takeaway
Long-term, Micron is more solid than ever. It does not get hurt as much as the others, due to its operations based mostly outside of China. The U.S. will add pressure on China to abide by international IP laws. The trade war battle is a macro event and is unpredictable. Investors may only keep its eye on Micron’s fundamentally improving story.
