A lot of readers I know have many questions on Micron Technology (MU) after some recent news.
MU shares pulled back before the end of the year after a Merrill Lynch analyst downgraded the stock to “underperform.” The analyst cited increased competition from Samsung (SSNLF) and SH Hynix, who are both expanding their dynamic random-access memory (DRAM) businesses.
Does this change my opinion of MU?
No. The fact is that much of the analyst community remains bullish about the company. Over the past two months, analysts have revised their consensus Q1 EPS estimate up nearly 5% to 44 cents per share. This represents a huge reversal from the 27 cents per share loss per share posted in the year ago quarter.
Meanwhile, Micron is headed towards 102.6% annual sales growth. Micron announced first-quarter results on January 7 and MU announced better-than-expected results.
Looking further ahead, Micron’s prospects look good. For FY 2014 Micron is expected to post 67.1% annual sales growth and to reverse last year’s loss of $0.18 per share to $2.09 EPS.
You’ll remember that Micron recently acquired Japan’s Elpida Memory Inc. and its 300mm DRAM fabrication facility, securing its spot at the second largest memory company in the world. So Micron is an unparalleled position to supply parts to smart phone and tablet makers like Apple (AAPL). Now that Apple has struck a deal with China Mobile (CHL) to sell iPhones in China, Micron Technology could very well be tapped to supply the necessary memory components.
Micron’s sales and earnings outlook remains bright and it is going to take the competition a long time to catch up to its DRAM business. So I consider this stock a strong buy in the meantime.