Micron stock rallies as strong data-center sales drive outlook, earnings

Micron Technology Inc. shares surged in the extended session Monday after the memory-chip maker forecast an outlook and reported earnings that topped Wall Street estimates as data-center sales proved to the company’s strongest growth sector. Micron
MU,
-1.17%
shares rallied 7% after hours, following a 1.2% decline in the regular session to close at $82.03.

The Boise, Idaho-based chip maker expects adjusted second-quarter net income of $1.85 to $2.05 a share on revenue of $7.3 billion to $7.7 billion. Analysts had forecast $1.84 a share on revenue of $7.29 billion. Read: Opinion: Micron stock’s roller-coaster ride surges toward a new peak “Data center is the largest market for memory and storage and we expect it to outpace the broader memory and storage market over the next decade,” said Sanjay Mehrotra, Micron’s chief executive, on the conference call with analysts. While Micron doesn’t break out data-center sales specifically from its compute and networking segment, which rose 34% to $3.41 billion in the first quarter, Mehrotra said on the call with analysts that data-center sales “grew more than 70% year over year as a result of continued cloud demand and the resurgence of enterprise IT investment.” “So, as the supply-chain shortages ease during the course of 2022, that will be a tailwind for demand for us for memory and storage products,” Mehrotra said. “We expect calendar-year 22 to be a strong year for data-center demand.” Data-center sales are also the strongest growing segments in other chip makers like Nvidia Corp.
NVDA,
-0.29%,
Advanced Micro Devices Inc.
AMD,
-1.42%
and Intel Corp.
INTC,
-2.02%,
which supply cloud providers. Micron specializes in DRAM and NAND memory chips. DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and servers, while NAND chips are the flash memory chips used in smaller devices like smartphones and USB drives. Like most semiconductors, memory chips have been in great demand during the COVID-19 pandemic, and prices have shot higher. Micron expects DRAM demand to rise in the low 20% range and in the high 30% range in 2021. For 2022, the company expects DRAM demand to rise in the mid-to-high teens, and NAND demand to rise about 30%. The company also said it spent $3.27 billion on capital expenditures in the first quarter, and expects $11 billion to $12 billion in capex spending in fiscal 2022. For the fiscal first quarter, Micron reported net income of $2.31 billion, or $2.04 a share, compared with $803 million, or 71 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $2.16 a share, compared with 78 cents a share in the year-ago period. Revenue rose to $7.69 billion from $5.77 billion in the year-ago quarter. Analysts surveyed by FactSet had forecast adjusted earnings of $2.10 a share on revenue of $7.68 billion, based on Micron’s forecast of $2 to $2.20 a share on revenue of $7.45 billion to $7.85 billion. Micron said DRAM sales made up 73% of revenue, or $5.59 billion, in the fiscal first quarter, for a 38% year-over-year gain, while NAND accounted for 24% of revenue, or $1.89 billion, up 19% year over year. Analysts on average had expected DRAM sales of $5.54 billion, and NAND sales of $2 billion, according to FactSet. Over the past 12 months, Micron shares have gained 15%, while the PHLX Semiconductor Index 
SOX,
-0.76%
has risen 35%, the S&P 500 index 
SPX,
-1.14%
 has gained 23%, and the tech-heavy Nasdaq Composite Index 
COMP,
-1.24%
has risen nearly 18%. Back on April 12, Micron shares closed at $95.59, just short of their all-time closing high of $96.56, set on July 14, 2000.

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