Rising DRAM Prices Will Drive Micron Technology, Inc. (MU) Stock Higher

For the second fiscal 2017 quarter, the company expects revenue of $4.35 billion to $4.70 billion, and non-GAAP earnings per share of $0.58 to $0.68. That is much better than the market expectations for revenue of $3.91 billion and adjusted earnings per share of $0.39. In the report, CEO Durcan said:

“Positive market momentum, driven by favorable demand trends and limited industry supply, produced solid results for our first quarter. We continue to make significant progress on our key technology and product initiatives, and we are pleased to have closed the Inotera acquisition on December 6, 2016, which we expect to further improve Micron’s strategic position and financial results.”

According to Micron Technology, Inc. (NASDAQ:MU), the increase in the first quarter sales of 23% compared to its prior quarter was mainly due to an 18% increase in DRAM sales volume, and 26% increase in NAND sales volume, and due to a 5% increase in DRAM average selling price. In my view, the increase in Micron’s gross margin in the recent quarter is quite impressive. The company’s gross margin in the first quarter was at 25.5% compared to gross margin of 18% in the previous quarter. Reductions in manufacturing cost and increases in the average selling prices of DRAM contributed to the significant improvement of Micron’s gross margin.

Conclusion

According to two new reports, the prices of DRAM and NAND Flash memories are expected to rise significantly in 2017, which will benefit Micron driving its share even higher. In fact, even in its Q1 FY2017 earnings report, the company achieved a 5% increase in its DRAM average selling price. Micron’s results for the last quarter were better than expected, and its guidance for the second fiscal quarter was significantly higher than analysts’ average estimate. All these factors bring me to the conclusion that MU’s stock still has further room to go higher.

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The article Rising DRAM Prices Will Drive Micron Technology, Inc (MU) Stock Higher originally appeared on amigobulls.com. Watch our analysis video on MU

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