Bull Of The Day: Micron (MU)

Micron (MU – Free Report) delivered another exceptional quarter of record revenue and profits on March 22 and analysts responded with further boosts to their estimates for coming quarters.

The upward EPS estimate revisions weren’t especially dramatic in the past few weeks, with the current fiscal year (ending August) only rising 3.4% from $10.63 to $10.99.

But that’s because the analysts were already busy before the company’s report moving the consensus from $10.13 to $10.63 on Micron’s updated guidance for fiscal Q2 released on February 5.

Fiscal Q2 2018 Highlights

Revenues of $7.35 billion, up 58 percent compared with the same period last year

GAAP net income of $3.31 billion, or $2.67 per diluted share

Non-GAAP net income of $3.50 billion, or $2.82 per diluted share

Operating cash flow of $4.35 billion, compared with $1.77 billion for the same period last year

“Micron executed exceptionally well in the second quarter, delivering record results and strong free cash flow driven by broad-based demand for our memory and storage solutions. Our performance was accentuated by an ongoing shift to high-value solutions as we grew sales to our cloud, mobile and automotive customers and set new records for SSDs and graphics memory,” said Micron President and CEO Sanjay Mehrotra. “Secular technology trends are driving robust demand for memory and storage, and Micron is well-positioned to address these growing opportunities.”

Extreme Value, Concerns About Supply

While the outlook for this fiscal year is no doubt fantastic — that $10.99 EPS represents 121.6% growth while the top line comes in at $29.16 billion for a whopping 43.5% sales advance — next fiscal year isn’t as bright.

Full-year 2019 EPS (starting in September) has risen 13.7% from $8.67 to $9.86 in the past 60 days. But that represents a decline of 10% year-over-year on the bottom line.

What’s the problem? It basically revolves around supply. Many experienced semiconductor analysts have seen this part of the cycle before where memory becomes abundant and prices drop.