Does Micron's New and Improved Price Make Sense After Earnings?
Key Points
Micron beat on earnings and quadrupled its sales in Q3.
New guidance for Q4 shows Micron earnings nearly as much in this quarter as in the previous three, combined.
Computer memory specialist Micron (NASDAQ: MU) stock surged 19.2% Thursday morning after crushing analyst forecasts for fiscal Q3 earnings.
Wall Street had expected Micron to earn $20.78 per share, adjusted for one-time items, on $35.8 billion in quarterly sales. Micron actually earned $25.11 per share, and its sales quadrupled year over year to $41.5 billion.
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Image source: Micron.
Micron Q3 earnings
GAAP earnings for the quarter weren't quite as good as the non-GAAP number noted above, but were still impressive: $24.67 per share, up 104% sequentially from Q2, and up 1,368% year over year! So Micron's not just selling more computer memory chips; it's making more profit on every chip it sells.
A lot more.
80.4% operating profit margins more.
And perhaps most interesting to semiconductor investors here is this tidbit: Demand for memory chips isn't just driving prices higher for memory used to bolster the effectiveness of artificial intelligence chips. Price hikes are spreading across memory chips for all purposes. While chips sold through Micron's "core data center" business achieved 83% operating margins, sales of chips to automotive companies for use in cars are now earning 75% (versus just 11% a year ago) as strained capacity raises the price of chips of all sorts.
How to think about Micron's share price
Wall Street analysts were forecasting Micron to earn $62.74 per share this year -- but that was before Micron beat earnings by $4.33. Micron's new guidance shows the company earning up to $31.73 per share in Q4; added to the $41.40 it's already earned in the first three quarters, the company's now on course to earn at least $73.13 per share this year.
On an $1,192 share price, that's a P/E ratio of only 16.3.
Micron stock still looks cheap to me.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
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