Micron

  • Micron   Technology reported second quarter non-GAAP EPS of $2.14, a   consensus beat of $0.16. Revenue rose 24.8% y/y to $7.79 billion.

  • The   company provided strong third quarter revenue guidance of between $8.5   billion to $8.9 billion, and adjusted EPS of between $2.36 and $2.56, and is   a testament to the underlying strength of demand for semi-conductor   microchips.

  • High   free cash flows (FCF) should also become a positive for the company in a   rising interest rate environment. Micron continues to add shareholder value   with the share re-purchase of $408 million shares in the current quarter,   over and above the $0.10c quarterly dividend declared.

  • The   groups two major operations consist of Nand, the specialist chip storage   business, which is expected to show growth of around 30%, and DRAM, the   memory chips operations which will increase contributions in the mid- to   high-teens range.

  • Secular   underlying drivers for Micron Technologies are demand from data centers,   increasing demand for electric vehicles, as well as strong growth in the 5G   usage from cellphones.

  • The   group is beginning to outsource some of its chip production to third parties   and is focusing on high- end products such as data centers, which are more   lucrative.

  • Some   of the challenges ahead in 2022 include rising material input costs as well   as supply chain constraints. The supply of components is expected to gradually   improve in 2022.

  • The share appears to be undervalued relative to its peers on a PE of   9.8x, and trades around $77.80 a share. Micron has a sound track record and   is a stock which I hold in discretionary portfolios for clients.

Micron