Micron Stock Soars 10% on Earnings Beat, Huawei Shipments

Micron stock soars 10% after hours

US-based pure-play memory chip maker Micron Technology (MU) has seen its stock fall 25% since May 3, when the US-China trade war reignited via higher tariffs and a trade ban on Huawei, a key customer in the telecommunications market.

Rising trade tensions and falling memory prices made analysts and investors pessimistic about Micron.

Micron Stock Soars 10% on Earnings Beat, Huawei Shipments

However, Micron surprised investors yesterday evening by reporting better-than-expected fiscal 2019 third-quarter revenue and earnings results after the market closed. On its earnings call, Micron stated that it had reviewed the Huawei ban, found a subset of products that was exempt from the ban, and started shipping them to Huawei in mid-June. These two announcements sent Micron stock up as high as 10% in after-hours trading. Even Western Digital stock rose as high as 4.4% in after-hours trading.

Micron’s fiscal 2019 third-quarter earnings highlights

Micron’s fiscal 2019 third-quarter revenue fell 39% YoY (year-over-year) and 18% sequentially to $4.79 billion, beating analysts’ estimate of $4.69 billion. It earned 64% of its revenue from DRAM (dynamic random-access memory) and 31% from NAND (negative-AND) in the third quarter of fiscal 2019.

The company reported better-than-expected revenue as DRAM sales volumes came in sequentially flat. Moreover, on a sequential basis, its DRAM and NAND average selling prices fell 20% and 15%, respectively, in the third quarter of fiscal 2019, lower than the previous quarter’s declines of 22% and 25%, respectively. The slowdown in memory price declines helped Micron report a non-GAAP (generally accepted accounting principles) gross margin of 39.3%, which was at the higher end of its guided range of 37%–40%.

Micron’s non-GAAP EPS fell 67% YoY and 39% sequentially to $1.05 in the quarter, beating analysts’ estimate of $0.79.

Micron’s fiscal 2019 fourth-quarter guidance

The US ban on Huawei saw many chip makers, such as Qorvo and Broadcom, cut their guidances, and Micron was one of them. In the fourth quarter of fiscal 2019, Micron expects its revenue to fall 6% sequentially to $4.5 billion, missing analysts’ estimate of $4.56 billion. It expects its non-GAAP gross margin to contract in the range of 27.5%–30.5% as memory price declines slow. It expects its non-GAAP EPS to fall 57% sequentially to $0.45, missing analysts’ estimate of $0.61 by 26%.