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Will Uptrend in Memory Market Aid Micron (MU) Q4 Earnings?

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Micron Technology Inc.'s (MU - Free Report) fourth-quarter fiscal 2019 results, scheduled to be reported on Sep 26, are likely to gain from a stabilizing memory market amid macroeconomic woes.

Notably, improving stability in the levels of NAND and DRAM inventories is expected to benefit DRAM and NAND pricing. Moreover, a sequential increase in worldwide chip sales in July indicates growing demand, which is a positive for Micron.

Shares of Micron have soared 56.3% year to date compared with the S&P 500 Index’s 19.9% gain.

Click here to see how the company’s overall fiscal fourth quarter performance is likely to be.

Stabilizing Memory Prices: A Ray of Hope?

Micron seems to be benefiting from stabilizing memory demand. Memory shipments are on an uptrend, courtesy of select U.S. hyperscalers, content improvement with Chinese mobile makers and the risk of a tightening supply due to the Japan-Korea dispute.

In the PC market, DRAM bit shipments saw growth revival in the last reported quarter as CPU shortages started to improve. The company expects strong sequential DRAM bit growth in the to-be-reported quarter’s results as laptop sales increase.

Per the Semiconductor Industry Association, worldwide sales of semiconductors came in at $33.4 billion in July 2019, an increase of 1.7% sequentially. This is expected to reflect positively in the memory chip sales of Micron, which is one of the leading players of the semiconductor market.

Within the data center market, Micron’s cloud customers are approaching normal inventory levels, which is a positive. In the last reported quarter, the company’s cloud DRAM bit shipments grew sequentially. Management believes that these early trends suggest strong sequential growth in the fiscal fourth quarter as well. Notably, the company earlier announced that it is idling 5% of its DRAM wafer starts and curbing capital expenditure. These measures will likely enable the company to reach a balanced inventory level only in the second half of 2019.

However, there is a glut in the market with excess supply due to the industry’s transition from 2D planar NAND production to 3D NAND. NAND bit demand is inversely related to price declines. However, due to the ongoing shift of the SSD portfolio, NAND shipment growth in the fiscal fourth quarter is likely to be stunted.

Therefore it remains to be seen as to what extent the surging memory market impacts Micron's revenues in the upcoming quarterly results.

Zacks Rank & Other Key Picks

Micron currently carries a Zacks Ranks of #2 (Buy). Some other top-ranked stocks in the broader technology sector are LogMeIn (LOGM - Free Report) , Anixter International (AXE - Free Report) and Perficient (PRFT - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for LogMeIn, Anixter and Perficient is currently pegged at 5%, 8% and 10.75%, respectively.

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