To The Moon

Introduction:

After Wednesday's post-market update on December 20th, Micron Technology reported its financial performance for the first quarter of the fiscal year 2024. With a revenue of $4.726 billion, a 15.7% YoY increase surpassing expectations, Micron has demonstrated consistent improvement in revenue and profitability over multiple quarters. This analysis highlights the positive performance, attributing it to the overall recovery in the storage industry, robust AI demand, and Micron's sustained stock price growth.

Financial Analysis: Strong Revenue Growth and Improved Profitability:

In Q1, Micron achieved a revenue of $4.726 billion, exceeding expectations and previous guidance of $4.5 billion and $4.7 billion, respectively, reflecting a 15.7% YoY increase. The company showcased commendable progress in narrowing its net loss to $1.234 billion, beating expectations. The loss per share stood at $1.12, slightly less than the expected $1.146, while the adjusted loss per share was $0.95, also below projections.

Operational Breakdown: Positive Trends in Memory Prices and AI Demand:

1. Confirmation of Memory Price Recovery:

- The global memory prices had shown a significant rebound since the third quarter, with major memory manufacturers adopting production cutbacks to address prolonged high inventory levels. This trend, coupled with a gradual PC market recovery and increased AI-driven server storage demand, has accelerated the overall revival of the memory chip industry.

- TrendForce forecasts predict a QoQ increase in DRAM and NAND flash prices in Q1 2024, expecting an 18% to 23% rise compared to Q4 2023. Current smartphone DRAM inventory is at 4 to 6 weeks, while NAND (eMMC, UFS) inventory is at 6 to 7 weeks.

2. AI Demand Stimulating Transformation in 2024:

- With the AI wave triggered by innovations like OpenAI's ChatGPT, companies like Microsoft, NVIDIA, and recently AMD with the MI300 AI chip, have experienced significant stock price surges. The focus now turns to the evolving AI landscape and its substantial impact on hardware industries, particularly high-bandwidth memory requirements.

- Micron's performance aligns with the anticipation of increased demand for high-bandwidth memory in AI servers. The flourishing AI industry, coupled with the overall recovery in the storage market, indicates a promising future.

3. Outstanding Q2 Performance Guidance:

- Micron has confidently provided optimistic performance guidance for the upcoming second quarter.

- Anticipating a revenue range of $5.1 billion to $5.5 billion, representing a 38.2% to 49.1% YoY growth, surpassing analysts' expected $4.99 billion.

- Projecting an adjusted EPS loss between $0.21 and $0.35, significantly lower than the forecasted $0.62, further contributing to positive market sentiment.

Conclusion:

Micron Technology's Q1 2024 results demonstrate sustained recovery, propelled by favorable trends in memory prices and robust AI demand. The company's strong performance and optimistic Q2 guidance indicate a positive outlook for the industry. With Micron's stock price exhibiting consistent growth, investors may find it worthwhile to consider maintaining a portion of their positions.

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