Micron Technology (NASDAQ:MU) Reports Q1 In Line With Expectations, Stock Soars

Kayode Omotosho /
2021/12/20 4:19 pm EST
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Memory chips maker Micron (NYSE:MU) reported results in line with analyst expectations in Q1 FY2022 quarter, with revenue up 33.1% year on year to $7.68 billion. Guidance for next quarter's revenue was $7.5 billion at the midpoint, which is 2.72% above the analyst consensus. Micron Technology made a GAAP profit of $2.3 billion, improving on its profit of $803 million, in the same quarter last year.

Is now the time to buy Micron Technology? Access our full analysis of the earnings results here, it's free.

Micron Technology (MU) Q1 FY2022 Highlights:

  • Revenue: $7.68 billion vs analyst estimates of $7.67 billion (small beat)
  • EPS (non-GAAP): $2.16 vs analyst estimates of $2.11 (2.57% beat)
  • Revenue guidance for Q2 2022 is $7.5 billion at the midpoint, above analyst estimates of $7.3 billion
  • Free cash flow of $671 million, down 64.2% from previous quarter
  • Inventory Days Outstanding: 107, up from 95 previous quarter
  • Gross Margin (GAAP): 46.3%, up from 30% same quarter last year

“Micron delivered solid fiscal first quarter results led by strong product portfolio momentum,” said Micron Technology President and CEO Sanjay Mehrotra.

Founded in the basement of a Boise, Idaho dental office in 1978, Micron (NYSE:MU) is a leading provider of memory chips used in thousands of devices across mobile, data centers, industrial, consumer, and automotive markets.

Sales Growth

Micron Technology's revenue growth over the last three years has been slow, averaging 2.67% annually. But as you can see below, last year has been stronger for the company, growing from quarterly revenue of $5.77 billion to $7.68 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Micron Technology Total Revenue

This was a good quarter for Micron Technology as revenues grew 33.1%, topping analyst estimates by 0.13%. This marks 7 straight quarters of revenue growth, which means the current upcycle has had a good run, as a typical upcycle tends to be 8-10 quarters.

However, Micron Technology believes the growth is set to continue, and is guiding for revenue to grow 29.9% YoY next quarter, and Wall St analysts are estimating growth 14.8% over the next twelve months.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.

Micron Technology Inventory Days Outstanding

This quarter, Micron Technology’s inventory days came in at 107, 5 days below the five year average, showing that despite the recent increase there is no indication of an excessive inventory buildup at the moment.

Key Takeaways from Micron Technology's Q1 Results

With a market capitalization of $92.9 billion, more than $9.58 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were very impressed by the strong improvements in Micron Technology’s gross margin this quarter. And we were also glad to see the improvement in operating margin. On the other hand, it was less good to see the inventory levels increase. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 6.4% on the results and currently trades at $87.33 per share.

Should you invest in Micron Technology right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.