Buy Micron Technology, Inc. (MU) Stock on This Ill-Advised Dip

Micron Technology, Inc. (NASDAQ:MU) pulled off a beat on both the top and bottom lines for its fiscal fourth quarter. But you wouldn’t know it by looking at Micron stock, which is off about 4% in Tuesday’s early after-hours trade.

3-29-16-micron-MU-stockMicron was good enough to beat analysts, but it appears Wall Street wanted better than good enough.

Micron posted fourth-quarter revenues of $3.22 billion, which came out ahead of analyst expectations for $3.13 billion. On a generally accepted accounting principles (GAAP) basis, Micron lost $170 million in Q4. Backing out certain items, though, MU finished with a 5-cent loss, which was less than the average estimate for a 12-cent deficit.

Boosting Micron’s results in the quarter were DRAM sales volumes that improved by 20% sequentially, as well as NAND sales volumes that were 12% better. The company also managed to squeeze out better margins on its DRAM products.

Investors shouldn’t immediately sweat the reactionary losses in Micron stock, as a lot of good news had been baked in. MU has chalked up an 85%-plus return since mid-May. That was when Applied Materials, Inc. (NASDAQ:AMAT) let Wall Street know that it would be turning up the volume on its DRAM spending.

Technically speaking, Micron investors don’t have much to worry about, either. Tuesday’s post-earnings drop has shares well above most significant moving averages and price resistance.

UPDATE: As I’ve noted in several posts this year for InvestorPlace.com, I’m bullish on Micron’s long-term prospects. And I still am. In fact, if anything, this could be a good time to buy on short-term weakness.

Micron CEO Mark Durcan appears to be getting more upbeat.  In the latest Q4 earnings report, he said:

“We are seeing improving market conditions in terms of both slowing supply growth and improving demand across a number of key segments.  In addition, we continue to execute on our key initiatives related to the deployment of advanced technologies and products to advantage our customers.”

A key driver is the continued strength in the mobile business. Let’s face it: As smartphones get more sophisticated cameras and multimedia features — as seen with the latest Apple Inc. (NASDAQ:AAPL) iPhone models — there will certainly be increased demand for memory chips.

MU has remained highly disciplined, too. The company recently announced a 7.5% reduction in the workforce as well as other moves to realize efficiencies. Micron expects to get more than $300 million in annual savings by fiscal 2017.

What’s more, Micron stock is capable of sustaining growth spurts for years — take 2013-14, when shares hit a peak of $35.

And lastly, Micron continues to be a cash generator. For the past year, cash flows from operations came to a hefty $3.17 billion. This means there will be enough to continue to make the necessary investments to remain competitive, such as with its initiatives like next-generation NAND flash memory technologies, cloud computing, embedded systems (such as for autos) and even the Internet of Things.

Micron stock will open lower today. Feel free to buy at will.

Tom Taulli runs the InvestorPlace blog IPO Playbook and also OptionExercise.com, which provides interactive tools and financial services for those who have employee stock options (pre- and post-IPO).Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/micron-stock-fourth-quarter-earnings-beat-mu/.

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