Q2 2022
- Micron Technology reported second quarter non-GAAP EPS of $2.14, a consensus beat of $0.16. Revenue rose 24.8% y/y to $7.79 billion.
- The company provided strong third quarter revenue guidance of between $8.5 billion to $8.9 billion, and adjusted EPS of between $2.36 and $2.56, and is a testament to the underlying strength of demand for semi-conductor microchips.
- High free cash flows (FCF) should also become a positive for the company in a rising interest rate environment. Micron continues to add shareholder value with the share re-purchase of $408 million shares in the current quarter, over and above the $0.10c quarterly dividend declared.
- The groups two major operations consist of Nand, the specialist chip storage business, which is expected to show growth of around 30%, and DRAM, the memory chips operations which will increase contributions in the mid- to high-teens range.
- Secular underlying drivers for Micron Technologies are demand from data centers, increasing demand for electric vehicles, as well as strong growth in the 5G usage from cellphones.
- The group is beginning to outsource some of its chip production to third parties and is focusing on high- end products such as data centers, which are more lucrative.
- Some of the challenges ahead in 2022 include rising material input costs as well as supply chain constraints. The supply of components is expected to gradually improve in 2022.
- The share appears to be undervalued relative to its peers on a PE of 9.8x, and trades around $77.80 a share. Micron has a sound track record and is a stock which I hold in discretionary portfolios for clients.