Why Micron Technology, Inc. (NASDAQ:MU) Stock Is Rising

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Micron Technology, Inc. (NASDAQ:MU) stock rose over 1.7% on 8th January, 2021 (as of 11:15 am GMT-5 ; Source: Google finance) after the company posted better than expected results for the first quarter of FY 21 and forecast second-quarter revenue above Wall Street estimates as a global shift to remote work and a recent uptick in 5G smartphone adoption drove demand for its chips.

During the first quarter, overall demand was strong across most end markets despite shortages of nonmemory components in PC, mobile, auto and graphics. Cloud demand was healthy while enterprise demand was weak due to the economic environment. Due to the stronger-than-expected demand at the end of the year, the company now expects that calendar 2020 industry DRAM bits demand growth was slightly above 20%, while NAND bit demand growth was in the mid-20s. For 2021, in DRAM segment, the pricing have started to increase in several parts of the market. 16 gigabyte adoption in client in data center modules has increased, causing the same supply tightness that was previously seen in 8 gigabyte, to also now be visible in 16 gigabyte. The company expects calendar 2021 DRAM industry bit demand growth of high teens, with DRAM industry supply to be below demand. Stronger-than-expected industry demand has reduced supplier DRAM inventories. Low inventories, along with disciplined industry CapEx in 2020 and the vaccine-driven recovery from the pandemic, should result in further tightening of the DRAM market through calendar 2021.

Further, the company will also benefit from higher content in 5G phones, which are forecast to double in unit sales in 2021 to around 500 million units. The company expects healthy unit growth in the PC market, and graphics should continue to benefit from new gaming consoles and from new gaming cards launched in the second half of last year. The company expects the cloud market to grow at a healthy pace and enterprise market recovery will be driven by the timing of the broader economic recovery.

MU in the first quarter of FY 21 has reported the adjusted earnings per share of 78 cents, beating the analysts’ estimates for the adjusted earnings per share of 71 cents. The company had reported the adjusted revenue growth of 12 percent to $5.77 billion in the first quarter of FY 21, beating the analysts’ estimates for revenue of $5.73 billion.

The company expects current-quarter revenue to be of US$5.8 billion, plus or minus US$200 million, while analysts on average were anticipating US$5.50 billion, according to IBES data from Refinitiv.

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