Micron Earnings Soar, But Weak PC And Phone Demand Keep It Grounded

Core Viewpoint - Bank of America Securities maintains a Neutral rating on Micron Technology despite strong earnings and positive guidance due to muted demand in the PC and phone markets affecting memory chip pricing [1] Financial Performance - Micron reported third-quarter revenue of $9.3 billion, a 16% increase, surpassing the consensus estimate of $8.87 billion [2] - The company achieved adjusted earnings of $1.91 per share, exceeding analyst expectations of $1.60 per share [2] - For the fourth quarter, Micron expects revenue of $10.7 billion, plus or minus $300 million, compared to estimates of $9.88 billion, and anticipates adjusted earnings of $2.50 per share, plus or minus 15 cents, against estimates of $2.01 per share [3] Market Position and Product Outlook - Micron is the last remaining pure-play U.S.-based memory company and the third-largest supplier of memory chips, including DRAM and NAND [4] - The company supports trends in artificial intelligence, 5G, machine learning, and autonomous vehicles, with an improved outlook for DRAM and a ramp in High Bandwidth Memory (HBM) [4] Gross Margin and Inventory Management - Micron expects a fiscal fourth-quarter gross margin of 42.0%, up from the guided 36.5% in the fiscal third quarter, attributed to a strong pricing environment and better product mix [5] - Management anticipates exiting fiscal 2025 with tight DRAM inventories and significantly reduced NAND inventories, aiming for overall company inventory near the target 120-day level [6] AI and HBM Opportunities - Micron's HBM opportunities are expanding, with shipments of HBM3e 12-high to four customers, and a projected market share of 20-25% in the $35 billion Total Addressable Market for calendar 2025, potentially reaching $2.4-2.5 billion by the end of the fiscal first quarter [7] Future Projections - The analyst raised sales estimates for calendar years 2025-2027 by 4-6% and EPS by 13-23%, but reiterated a Neutral rating due to uncertain NAND pricing and ongoing cost headwinds affecting gross margins into calendar 2026 [8] - Projected fourth-quarter sales are now $10.71 billion (previously $9.83 billion) and adjusted EPS of $2.50 (previously $1.82) [8]