Micron On Its Way To Repeat 2013 Stock Performance

| About: Micron Technology (MU)

Micron (NASDAQ:MU) is all set to announce its earnings today. The semiconductor company had a good run in the past year and saw its stock price making a steep run. There were many catalysts behind the performance of the stock. The company made key acquisitions and the general improvement in the memory market provided further fuel for the stock. Micron is among the few companies opening the quarterly earnings season. Let's have a look at the company to see how it is going to fare now that its quarterly numbers are out.

Earnings Effect

Despite the good run shown by the company stock in the previous year, Micron's last earnings announcement was more of a dampener. While the financials looked good, their impact on the stock price was negative. The company posted a 45% increase in its quarterly revenue in the previous quarter, while it also managed to reverse its per share net loss. However, the stock markets did not respond well. The stock rebounded later and is now trading at more than 15% higher.

MU 1 Year Price Returns Chart

MU 1-Year Price Returns data by YCharts

The company also posted a net loss in the past five years out of the ten, with its accumulated net losses amounting to over $3 billion. However, Micron delivered rather strong numbers for its first fiscal quarter. Markets expected the memory manufacturer to post 44 cents in earnings for the quarter ending on November 2013, while its revenue was estimated to be at $3.72 billion. In the past 30 days, five expert analysts have increased their EPS estimates for the company which is a positive sign. However, the company posted its EPS at $0.77 per share. Its revenue surpassed market expectations at $4.04 billion. The company stock jumped 5% in the after market post announcement.

Opportunities Ahead

Micron has been expanding its portfolio lately. Its acquisitions are also expected to provide synergies. During the previous year, Micron acquired Elpida. While it is too early to see the positive impact of the acquisition on the financial numbers, the deal is likely to have long-term implications for the company.

Apart from other facilities, Micron acquired Elpida's 300mm DRAM fabrication unit in Japan. According to the numbers crunched by IDC Corp, Micron is likely to snap up 28 percent share of DRAM market, only second to Samsung (OTC:SSNLF). Elpida is also a supplier to Apple (AAPL) and thus Micron gets to be a part of Apple's success story.

Bigger market share will also give Micron better hold on product price. Micron is also expected to divert some of Elpida's production capacity towards NAND flash memory products, the market in which it already holds a prominent position. The NAND market enjoys a higher margin than the volatile DRAM market. The market is also growing at a high rate.

After long slump, the memory market seems to be picking up as the market price for the memory products go north. This means better revenue and a higher margin for Micron. In addition, with this acquisition, Micron reduced the competition in the market.

Another mistake in Rexchipajor step was to acquire a majority Electronics. It now also controls 100% of the company's production side. On the flip side, Micron is now under obligation to pay $10 million per quarter to its rival Rambus. The companies have been embroiled in a bitter legal battle on patent issues. While, the agreement would cost Micron a pretty penny, it will also bring more certainty about the future.

Institutional Participation

While retail investors revived their interest in the stock, institutional investors also grabbed a piece of the pie. During the last year, the company had good Institutional money flow. Among its prominent purchases was the $402 million purchase of 23 million shares by Greenlight Capital.

Another institutional investor, Viking Global Investors LP, upped its stake by 400% last year. Morgan Stanley increased its holding by over 200%. Institutional participation is generally a positive sign and a precursor for good times ahead.

Bottom Line

While Micron delivered positive results, the overall long-term scenario for the company also looks well. The company has consolidated its position well in the market. The memory market itself is on the rebound, which also bodes well for its participants which definitely include Micron. In 2013, the company made a number of strategic decisions which will guide its future course.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , , , Semiconductor - Memory Chips
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