Micron Technology Inc. (MU) reported fiscal third-quarter sales and profit that topped analysts’ estimates as the largest U.S. maker of memory chips benefited from price increases.
Net income for the period ending in May was $43 million, or 4 cents a share, on revenue of $2.32 billion, the Boise, Idaho-based company said in a statement yesterday, marking a return to profitability after two years of losses. Analysts on average estimated a profit of 3 cents on sales of $2.25 billion, according to data compiled by Bloomberg.
Market prices for memory chips, which store information in computers and mobile devices, have gained as manufacturers such as Micron, Samsung Electronics Co. (005930) and SK Hynix Inc. (000660) have slowed increases in output to avoid a supply glut. The balance between supply and demand will last for at least the rest of this year, according to Doug Freedman, an analyst at RBC Capital Markets.
“The market’s good,” said Freedman, who is based in San Francisco and rates Micron outperform, the equivalent of a buy. “This won’t roll over too quickly.”
Micron’s shares, which have more than doubled this year amid an anticipated increase in chip prices, are trading near a six-year high. Micron was the second-best performer in the Philadelphia Stock Exchange Semiconductor Index this year through yesterday. The stock fell 3.1 percent to $13.54 at 9:51 a.m. in New York.
“We remain somewhat cautious, as valuation appears to be near historic highs,” said Ada Menaker, an analyst at MKM Partners LLC. At current levels, the stock already reflects “positive pricing trends driven by a tight supply environment,” Menaker, who has a neutral rating on the shares and a $13 target price, wrote in a research report.
Micron is acquiring Japan’s Elpida Memory Inc. to gain control of more manufacturing facilities and further stabilize prices. The company makes dynamic random access memory, or DRAM, which provides the main memory in personal computers. It also makes Nand flash memory, chips that provide the storage in mobile devices such as smartphones and tablets.
The balance between demand for those chips and supply will probably remain favorable for the rest of this year, according to Mark Adams, Micron’s president. While the PC industry is suffering shrinking unit shipments, DRAM makers have matched supply to market conditions, he said.
“We think this is a supply recovery,” Adams said in a telephone interview. “The PC side of the house is definitely not driven by a demand curve that is up and to the right.”
Micron and its competitors remain reluctant to invest in new plants that might flood the market with unneeded chips, he said. A year earlier, Micron reported a loss of 32 cents a share on revenue of $2.17 billion.
Micron agreed in July to acquire bankrupt Elpida for 200 billion yen ($2.07 billion). Elpida, the last Japanese maker of computer-memory chips, sought bankruptcy protection after losses left it unable to pay debts.
“We are in one of those windows when things feel good,” said Alex Gauna, an analyst at JMP Securities LLC in San Francisco who rates the shares market perform, the equivalent of a hold.
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