Micron (NASDAQ:MU) reported Q1 non-GAAP EPS of $0.48 despite revenue falling 35% from last year to $5.14 billion. The stock rallied strongly after the report posted on Dec. 18. Expect this stock performance holding up.
Downside is Over
Micron’s CEO said "With our strong execution and improving industry conditions, we are optimistic that Micron's fiscal second quarter will be the cyclical bottom for our financial performance.”
The bright future ahead is despite a challenging industry environment. A demand-supply balance for both DRAM and NAND and favorable recent business trends gives Micron management optimism for 2020. The company will continue increasing its mix of high value solutions. For example, NAND bits will grow to over 66% in FY 2020. By 2020, it will grow to up to 80%.
Cost management in the last few years will allow the company to grow profit margins. Plus, licenses for providing support for various products not subject to Export Administration Regulations and Entity List restrictions is one less worry for investors. It may also face no restrictions for new products for Huawei’s mobile and server businesses.
In Q1, DRAM revenue fell 41%. And although ASP fell Q/Q, shipments rose in the mid-20% range from last year. NAND revenue fell 14% Y/Y but bit shipments rose in the mid-teen percent range Q/Q.
Looking ahead, Micron will get to 80% of NAND bits into high-value solutions in fiscal 2021. So, the recent breakout in Micron stock should continue for a while longer.
