Opinion: Micron stock’s roller-coaster ride surges toward a new peak

Micron Technology Inc. investors have been on a bit of a roller coaster in recent years, and the ride appears to be headed up a new hill. Micron
MU,
-1.17%
enjoyed huge gains in 2018, only to fall back as a shortage of memory chips turned into a glut, thanks to declining demand from cloud-focused “hyperscalers” that were building huge data centers. That led to struggles in 2019 and 2020, but the business has turned around over the past year as the latest semiconductor shortage has pushed prices higher — along with Micron stock.

The Idaho-based chip maker reported better-than-expected fiscal first-quarter earnings and slightly better revenue Monday, boosted by strong sales of its chips to the data-center market. Even better was the company’s second-quarter revenue outlook, ranging from $7.3 billion to $7.7 billion, topping Wall Street projections of $7.29 billion. The company’s shares soared almost 7% in after-hours trading, continuing a strong recovery from a drop in late September and a steeper one in October, when shares slumped more than 9%. The stock had previously hit an all-time high in April, on hopes of the type of boom that was finally laid out Monday. But this year’s earlier quarterly results couldn’t sustain the gains amid questions about the slowing personal-computer market. As the PC market started to see a slowdown from its pandemic-fueled boom — when consumers were buying new PCs and other peripherals to work from home — the demand for memory chips started to slow and affect pricing. But once again, the data-center market is playing a key role in another big boom at Micron. Sanjay Mehrotra, Micron’s chief executive, told analysts on the company’s conference call Monday that the data-center market is the largest one for memory and storage products, and its growth will outpace other end markets. Micron Chief Financial Officer David Zinsner echoed those comments. “Essentially, we expect a healthy industry demand/supply environment in calendar-year ’22, particularly on the side of DRAM.” In late September, Micron’s guidance was lower than expected because of the slowing PC boom. Then in October, a magnitude-6.5 earthquake in Taiwan disrupted production at one of its manufacturing plants, a double whammy for a company already dealing with ongoing supply-chain issues in the semiconductor industry. Wall Street though, decided that a shortage of chips would lead to an increase in memory-chip prices, so the earthquake ironically contributed to Micron’s shares rebounding. On Monday’s call, Micron executives said that they were still working on getting new equipment for the Taiwan plant, but they had factored the longer lead times into their forecasts. With the big jump in data-center sales, though, Micron reassured Wall Street again that it is not just a PC-memory company, and that its fortunes are not tied only to the PC. Even as some offices remain closed amid the pandemic, the demand for more computing power for far-flung data centers is still increasing. And that’s good news for Micron, which appears to be on the rise again.

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