By: Dividend Sensei
Micron Technology (NASDAQ:MU) has staged a terrific comeback in 2020 after starting the year on its back foot. The computer memory specialist struggled with unfavorable demand/supply dynamics in 2019 that tanked its price, and the novel coronavirus added more uncertainty into the mix earlier this year.
But Micron’s latest quarterly results are proof that its turnaround is officially complete. The chipmaker crushed Wall Street’s fiscal 2020 third-quarter expectations and delivered even better guidance, which is impressive considering that spot memory prices have weakened lately. But with Micron stock now up nearly 25% since April, will it be a good idea to go long? Let’s find out.
Micron is stepping on the gas
Micron’s revenue increased by 13% year over year during the quarter. The company anticipates revenue of $6 billion this quarter at the midpoint of the guidance range. That figure would be a 23% jump over the prior-year period’s top line of $4.87 billion.
Revenue isn’t the only improvement Micron investors should look forward to. The company expects a non-GAAP (adjusted) gross margin of 35.5% in the current quarter — a huge leap over the prior-year period’s figure of 30.6%.
For comparison, Micron’s third-quarter non-GAAP gross margin of 33.2% was significantly lower than the year-ago period’s figure of 39.3% thanks to tepid memory prices. Not surprisingly, its adjusted earnings of $0.82 per share were significantly below the year-ago period’s earnings of $1.05 per share.
All that is about to change soon. The gross margin forecast for the current quarter makes it clear that Micron is enjoying a favorable pricing environment now. CFO David Zinsner explained over the latest earnings conference call that Micron is witnessing improvements in average selling prices (ASPs), as well as in shipments of DRAM (dynamic random access memory) and NAND flash.
The company is looking at adjusted earnings of $1.05 per share this quarter, a big improvement over the prior-year period’s earnings of $0.56 per share. We can safely conclude that Micron is all set to kick up a notch in the current quarter. But don’t be surprised to see the company sustain its momentum beyond the short run, as it’s sitting on some powerful growth drivers.