The projections are looking great for Thursday evening’s earnings report from a well-known graphics card producer. Analysts are calling for 58% sales growth and a whopping 1,800% earnings growth. On top of this, the consensus EPS estimate has jumped 118% in the past 90 days. For the past several quarters, this comeback story has posted double-digit earnings suprises.Which company am I referring to?
I’m talking about Micron Technology (MU), which will release its fiscal second-quarter results after the market closes on Thursday. Micron is one of the largest and best established producers of memory chips.
Nearly forty years ago, Micron got its start with a 64-kilobyte memory card that could only contain about half a newspaper’s worth of information. Over the years, the company has expanded the capacity of its memory chips hundreds of thousands of times over and has broadened out into chips that can power a host of products. Currently, the company employs 30,000 worldwide across 20 countries and it brings in over $12 billion in sales each year.
Micron’s specialty is in dynamic random access memory (DRAM) products for data storage and retrieval (including high-speed and high-bandwidth) and specialty DRAM products used in computers, servers, tablets, mobile phones, communication equipment, computer peripherals, industrial, automotive and other electronic devices. DRAM accounted for about 60% of the company’s revenue last year.
The next biggest source of revenue are NAND flash memory products, which are used in mobile phones, solid-state drives, tablets, computers, industrial and automotive applications. These garnered 30% of sales.
After a bumpy few years, things are looking up for Micron. Analysts have been steadily revising their earnings estimates higher as DRAM prices have increased. The stock has rebounded an incredible 180% over the past year. However, I expect that MU has plenty of room to run higher. The stock still trades at less than eight times forecasted earnings, and it has simply stunning sales and earnings forecasts for the next several quarter.
My expectation is that this will be a headline-making earnings report, so I consider MU an A-rated Strong Buy.