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Micron: A Great Opportunity

Apr. 12, 2018 9:56 AM ETMicron Technology, Inc. (MU)103 Comments
Alberto Wallis profile picture
Alberto Wallis


  • Q3 results expected to drive diluted EPS to $2.83.
  • P/E ratio of 6.04 is well below its competitors.
  • Net profit margin continues to rise and is currently at 38.7%.
  • Price targets of around $73 represent around 45% upside.

After hitting a high of over $61 this past March, Micron Technology's (NASDAQ:MU) stock lost around 17% of its value and currently trades at $50.48. The decline came after the company announced its Q2 results, which didn't quite live up to the hype of investors, even though Micron set company performance records in key metrics such as revenue, gross profit, EPS, and cash generation, driven by a strong demand for their DRAM and NAND products in the automotive market.

Q2 Results and Guidance

In their latest earnings call, Micron announced revenues were $7.35 billion, up 8% from the prior quarter and 58% from the prior year, and non-GAAP operating margin was 49%, up 3% compared to the prior quarter and 24% from the prior year period. This reflects a positive business environment and broad-based demand for Micron's memory and storage solutions (cloud, enterprise, and mobile markets).

As a result of their performance, the company generated $4.3 billion in cash from operations compared to $1.8 billion in the past year. Capex (net of third-party contributions) was $2.1 billion, resulting in a very positive free cash flow of around $2.2 billion, especially when compared to last year's free cash flow of approximately $600 million.

According to the company's guidance, revenue is expected to be in the range of $7.2 billion to $7.6 billion, with a gross margin of 57-60%. An increase in operating expenses is also expected, primarily from an increase in R&D (funding of fourth-generation 3D NAND technology). Based on a share count of approximately 1.25 billion shares, these results should drive diluted EPS to $2.83 (+/- 7 cents). The company will also continue to evaluate additional opportunities to accelerate de-leveraging, while still providing a high rate of return for its investors.

Micron expects DRAM demand, which accounted for about 71% of their

This article was written by

Alberto Wallis profile picture
Financial Analyst at Fincredible. I'm focused on finding quality growth stocks with significant potential for outperformance. I look for companies with sound business models and economic advantages that can deliver strong results over the long term. I studied Economics at the Universidad Metropolitana in Venezuela, and I'm currently pursuing a Master's Degree in Finance com IESA Business School.

Analyst’s Disclosure: I/we 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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