Another Strong Earnings Report for Micron Stock
Shares of Micron Technology, Inc. (NASDAQ: MU) took flight on Wednesday morning after the company beat earnings expectations. Investors were happy to give the share price an 8.5% bump, but it would be a mistake to think that MU stock is out of gas.
It’s just getting warmed up.
No amount of cheerleading is going to convince you that Micron stock is worth it. You really have to look at the numbers yourself. Here’s an overview of the earnings report for the fourth quarter of 2017:
- Revenues increased 91% to $6.14 billion
- GAAP Net Income of $2.37 billion, or $1.99 per diluted share
- Gross Margins of 50.7%, compared with 18.0% YoY
- DRAM Sales Volume increased five percent from previous quarter
- NAND Sales Volume increased three percent from previous quarter
What stands out from these numbers? Well, first off, there is the heightened demand for DRAM chips. No one expected that—except, of course, Micron’s upper management. They saw it coming from a mile away.
To realize the truth of this, look no further than Micron’s $3.2-billion acquisition of Inotera Memories, Inc.
Investors that criticized it as a boondoggle have fallen silent. Why? Because it’s looking prophetic now that manufacturers are increasing their demand for DRAM chips.
Also Read: Best Semiconductor Stocks List for 2017
But that’s not the only reason for our bullish Micron stock prediction. Cloud computing is also driving its resurgence. And since that well is not drying up anytime soon, we should see MU stock price accelerate to $50.00, $75.00, and then $100.00.
Chart courtesy of StockCharts.com
Can MU Stock Reach $100?
Some of you are probably skeptical about this Micron stock prediction.
After all, going from $37.00 to $100.00 represents 170% upside. Surely, that isn’t possible. Didn’t Micron already double its share price in the last 12 months? It can’t possibly repeat that feat…right? Right?!
Of course, Micron stock can reach $100.00. If the tailwinds that drove it from $10.00 to $37.00 had evaporated, then perhaps we’d have to reconsider our forecast. But cloud computing is still on the rise and Micron is still a crucial player in that industry.
The company expects +20% growth in DRAM and +30% growth in NAND through the remainder of the calendar year. As for the 2018 fiscal year, Micron is aiming for another +20% bump to DRAM sales, not to mention an increase of NAND sales growth to +50%.
Put another way, there is no slowing down this company.
The secret sauce of Micron’s success is cloud computing. Chips designed for cloud computing used to contribute one percent of the company’s operating income. They now account for more than half.
And when I say “used to contribute one percent,” I don’t mean five years ago. I mean last year.
That is the scale of growth we’re talking about: explosive, dramatic, monumental, and every other clichéd adjective that’s used to denote a stock on the verge of triple-digit gains.
Two years ago, we published a report titled “MU Stock: Is Micron Technology, Inc. a $25 Stock?” Micron stock was trading at $14.00 at the time, and investors had little to no interest in semiconductor stocks.
While we were right to believe that MU stock would surge, our mistake was dreaming too small. We didn’t realize that a $37.00 Micron stock forecast could manifest this quickly. It was a mistake, to be sure, but hardly a unique one—every analyst falls into this trap at least once.
It happens when we swim in the shallow end of the pool. When we don’t take chances on promising stocks for fear of drowning in our mistakes. No more. This time we are ready to commit to our bullishness on Micron stock.
As such, we place a $100.00 price target on MU stock.