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Home / Business / Micron jumps on better-than-feared results and guidance: 7 Key Takeaways

Micron jumps on better-than-feared results and guidance: 7 Key Takeaways



A quarter of a quarter and relatively positive DRAM demand prospects, Micron (MU – Get Report) gives shares after earnings.

After Tuesday, Micron reported for the fourth quarter of last year $ 4.79 billion (down 39% annually) and non-GAAP EPS of $ 1.05. These figures topped consensus analyst estimates of $ 4.69 billion and $ 1.05. The gross margin came in at 39.3%, down from 60.9% a year ago, but towards the high end of a guidance area of ​​37% to 40%.

On the earnings call, the memory match for the August quarter led sales of $ 4.3 billion to $ 4.7 billion (down 47% annually at midpoint) and EPS of $ 0.38 to $ 0.52. The revenue guidance is under a consensus of $ 4.56 billion at its $ 4.5 billion point, while EPS guidance is completely below a $ 0.58 consensus. The gross margin is expected to fall to a range of 27.5% to 30.5%.

Nevertheless, with Micron's shares having fallen sharply since the beginning of May, and near-time expectations are relatively low, the markets respond positively to the figures. From the time of this article, the stock is up 8.2% in the after-trade to $ 35.35.

Here are some remarkable kitchen sales from Micron's earnings report and conversation.

1
. Micron slightly improved DRAM demand Outlook

In March, the Micron forecast for the DRAM industry voltage will grow by a percentage as a percentage of high teens by 2019, and the demand for business will grow by a percentage from mid to teenagers. Now, even though Micron admits the DRAM market, it is still foreseen, for mid-2010, the company is leading some demand growth, while maintaining its pre-supply.

Although the Huawei parts are a breeze at that time) and Micron indicated DRAM stocks among corporate server customers, "takes a little longer to normalize than had previously expected", the company sees normalizing customer holdings among cloud and graphics DRAM clients, and also a download in PC DRAM demand such as Intel (INTC – Get Report) CPU shortage ease. As a result, Micron expects "strong growth" for cloud, graphics and PC DRAM shipments in the August quarter, followed by "more normal bit growth" in the November quarter.

2. Micron maintains its NAND Supply and Demand Outlooks

As was the case in March, the Micron forecasts for the NAND flash memory industry's bit supply will grow by a percentage of 30 percent in 2019, and the small demand will grow at a midpoint of 30 percent. . But with the NAND market, which is still understood, Micron says that now the NAND chip wafer is cutting off by about 10%, up from a previous 5%.

DRAM accounted for 64% of Micron's revenues last year and NAND 31% of revenues.


Micron's latest outlook for 2019 DRAM and NAND flash memory supply and demand growth. Source: Micron.

3. Prices and margins remain under pressure

After falling by 20 percent and 20 percent, respectively, during the February quarter, Micron's DRAM and NAND average sales prices (ASP) fell by about 20 percent and a mid-year percentage. during the May quarter.

Thanks largely to these price declines, Micron's non-GAAP gross margin (GM) fell to 39.3% in the previous quarter from 50.2% in the February quarter and 60.9% a year ago. And for the August quarter, Micron has set a GM guidance area of ​​27.5% to 30.5%.

The company notes that production ramps for its 1-year DRAM production process and high-density, 96-layer, 3D NAND chips bounce up their margins slightly, and that the bottom line looks stronger than it did during the recent downturn in the industry. , when Micron reported losses for three quarters.

4. Capital expenditure is expected to be "significantly lower" in fiscal policy 2020

Having cut its fiscal 2019 (ending in August 2019), investing the budget in both December and March, Micron maintains fiscal 2019 capex guidance of around $ 9 billion. However, it expects capex to be "meaningfully lower" in fiscal policy 2020, as the company is trying to keep DRAM and NAND supply growth "aligned" with expectations of demand growth.

By comparison, the consensus that Micron's capex was supposed to fall to $ 8.5 billion in fiscal 2020. Despite Micron's capex comments, the shares of the chip equipment vendors increased Applied Materials (AMAT – Get Report) and Lam Research (LRCX – Get Report) both about 1% in post-trade, as investors took some heart in the company's May quarter beat and DRAM demand outlook. Formal fiscal 2020 capex guidance is likely to be shared at the time of Micron's quarterly report.

5. Inventory continues to grow

Although Micron sees some of its customers' inventory normalizing, its own inventories increased 12% sequentially and 36% annually to $ 491.9 billion. Days of outstanding inventory rose by another 8 sequentially to 151.

"To meet expected growth in demand demand, we carry higher levels of NAND inventory in the 2019 and 2020 calendar," said CFO Dave Zinser on the call. also to carry higher levels than DRAM inventory in calendar 2019, as industry supply and demand are working to balance. "

Managing Director Sanjay Mehrotra said Micron expects DRAM inventories to begin to drop and remain" a relative good place "at the end of the 2019 calendar, albeit by adding, they still can't be at" optimal levels. "He also noted elevated inventory factors in Micron's plans to cut the captain in fiscal 2020 and that since Micron's gross margins are still positively positive, it does not expect any write-downs on the value of the portfolio to be due to a memory price decrease.

6. Micron continues to say that the export of product is for Huawei

is not surprising, Micron says that the export restrictions imposed on Huawei in May weighed on quarterly DRAM and NAND sales – the company suggests that quarterly revenue had been at least $ 200 million higher – and that the ban would also affect sales in August quarter. Micron also revealed that it wrote down about $ 40 million worth of Huawei-related inventory.

But Mehrotra said that after a review, Micron concluded that it could "legally continue to submit a subset of current products" to Huawei, and that his company began to do so over the last two weeks. He refused to share how large these shipments are.

7. Stock Buybacks Slowed

Micron spent $ 157 million on stock purchases in the May quarter, down from $ 702 million in the February quarter and about $ 1.8 billion in the November quarter

Zinser pointed out Micron's target of spending at least 50% of its annual Free cash flow on repurchase. Worth noting here: Although it is likely to recover when industry conditions increase, Micron's adjusted free cash flow fell to $ 500 million in the May quarter from $ 1 billion in the February quarter and $ 2.2 billion in quarter.

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