Micron's FQ4 earnings preview: Watch memory pricing, FQ1 guidance


Chipmaker Micron (NYSEARCA:MJ) reports fiscal Q4 results after the bell on Tuesday. Consensus estimates expect $5.9B in revenue and $0.98 EPS.

Last quarter, Micron guided the top and bottom lines at $5.75-6.25B and $0.95-1.15, respectively. The company added on estimated gross margin of 34-37% and $625-675M in operating expenses.

Focus on DRAM/NAND: Pricing weakness drove Micron’s sales down for five straight quarters before the recovery started last quarter.

In FQ3, DRAM revenue was up 16% sequentially and 6% Y/Y with ASPs up in the mid-single-digit percent range on the quarter. NAND sales were up 10% Q/Q and over 50% Y/Y with ASPs up in the low single-digit range. DRAM was 66% of Micron’s overall revenue and NAND made up 31%.

Watch FQ1 guidance: During a Q&A with KeyBanc last month, Micron CFO Dave Zisner said FQ4 results would be more “back end loaded” than usual and warned the company will likely miss its FQ1 revenue guidance of $5.4-5.6B.

Zisner cited customer supply uncertainties, supply imbalances with some end markets recovering faster than expected and others lagging, and a higher amount of product qualifications happening toward quarter’s end.

Micron said cloud server demand remained healthy but H2 sales will likely be below the pandemic-driven H1 boom. Enterprise server demand was seen as “clearly weak.”

Recent analyst color: Cleveland Research upgraded Micron, expecting the company to return to upside performance in H2 next fiscal year with stronger footing into FY22 as the supply/demand improves. In Goldman’s upgrade, the firm said the DRAM/NAND pricing weakness was already priced into shares.

Citi expected the DRAM weakness to continue for two to three more quarters. KeyBanc warned the U.S. actions against Huawei (7-9% of MU revenue) could ding sales in Q1-Q2 but remains a bull, advising investors to pick up shares during any “opportunistic pullbacks.”

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Peer movers: Shares of Western Digital (NASDAQ:WDC), which holds a larger percentage of the global DRAM market than Micron, usually moves with MU news. The supply chain is less likely to move, but American Superconductor (NASDAQ:AMSC) gets 25% of its revenue from Micron and moves in sympathy about a quarter of the time, according to Bloomberg data.

Micron shares have gained 9% in the past month and are up 1% in the quarter but are down about 9% YTD. Here’s how the six month performance has stacked up next to WDC, the tech sector (NYSEARCA:XLK), and the S&P 500:





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