Micron Earnings After Close Tuesday: Looking Good

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When a stock triples its value in one year, the obvious question is not whether it can repeat that performance again so much as it is whether there is any headroom left. No one expects 200% gains, especially from a company that was founded 35 years ago.

The stock in question here is Micron Technology Inc. (NASDAQ: MU), which reports first quarter fiscal 2014 earnings after the bell on Tuesday. The consensus estimate calls for earnings per share (EPS) of $0.44 on revenues of $3.72 billion, compared to a net loss of $0.27 per share in the same period a year ago. The revenue estimate is double last year’s quarterly total.

Analysts were a bit too exuberant last quarter, estimating EPS of $0.25 against the final figure of $0.20. They have backed off from an initial estimate of $0.47 for this quarter, but that is still way ahead of last year’s loss.

There are two primary reasons for the sea change. First was the company’s acquisition of Japan’s Elpida Memory out of bankruptcy for a bargain price of $2.5 billion. The acquisition gave the company a 25% share of the market for DRAM, second only to Samsung Electronics’ 42% share. The company also increased its stake in Taiwan’s Rexchip, adding to its pricing power for DRAM.

Second, Micron benefits from its position as a supplier to Apple Inc. (NASDAQ: AAPL). Apple uses the company’s chips in its iPhone 5c.

Even given its recent high-powered performance, though, Micron’s forward multiple is just 9.34, based on projected fiscal 2015 earnings, and the analysts’ price target for the company is right around $23.10, indicating a potential upside of nearly 12%. That forward multiple should be stronger than that, given Micron’s increased ability to manufacture NAND flash memory, a higher margin product than its DRAM chips.

The stock’s 52-week range is $7.06 to $23.67, and the stock closed at $20.67 Monday. Shares were trading up about 3.5% on Tuesday at $21.38, following an analyst’s upgrade on SanDisk Corp. (NASDAQ: SNDK), adding even more anticipation for Micron’s tale of the tape.