What Happened:
Shares of memory chips maker Micron (NYSE:MU) jumped 5.3% in the morning session after the company reported first quarter results that exceeded Wall Street's expectations for revenue and EPS. Revenue guidance for the next quarter was also comfortably ahead of expectations. Lastly, inventory levels shrunk, and CEO commentary in the release was optimistic. "We expect our business fundamentals to improve throughout 2024, with record industry TAM projected for calendar 2025. Our industry-leading High Bandwidth Memory for data center AI applications illustrates the strength of our technology and product roadmaps, and we are well positioned to capitalize on the immense opportunities artificial intelligence is fueling across end markets." Zooming out, this was a solid quarter, highlighting the company's improved capabilities, especially within the booming AI space.
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What is the market telling us:
Micron Technology's shares are somewhat volatile and over the last year have had 9 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago, when the stock gained 6.6% on the news that the company reported earnings. While the results trailed the consensus estimates for revenue and operating profits, Wall Street analysts noted that the semiconductor company had faced a steeper slump than anticipated, but signs of a rebound are emerging. The outlook from the company was optimistic, with Sanjay Mehrotra, the chief executive, affirming his "confidence" in the long-term demand scenario and envisaging "gradual improvements" in the industry's supply-demand equation. The stock reaction suggested that the market is putting more weight on longer-term risk/reward than near-term cyclical results.
Micron Technology is up 66.9% since the beginning of the year. Investors who bought $1,000 worth of Micron Technology's shares 5 years ago would now be looking at an investment worth $2,772.
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