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Micron Mashes the Accelerator

Stocks in this article: MU BRCM AMAT SNDK SSNLF

NEW YORK ( TheStreet) -- Investors who are still unsettled about the state of the semiconductor industry have every cause to kick themselves for having missed out on Micron's (MU - Get Report) impressive 240% gains in 2013.

While fears about high-end device saturation and weakening average selling prices (ASP) were valid reason to avoid companies like Broadcom (BRCM), the situation, however, has been entirely different for Micron, which operates within the memory chip space. And as with Applied Materials (AMAT) and SanDisk (SNDK), this entire subset continues to enjoy above-average economic returns.

As I've said recently, while I've been a firm believer in Micron's turnaround potential, particularly due to its strategic shift to higher growth markets like network enterprise, I do wonder how long this resurgence can continue. Not just with Micron, but for the entire industry.

Upon Wednesday's release of first-quarter earnings, management did its best convening job yet (even with the stock being up close to 250% from its 52-week low). Analysts were looking for 44 cents in earnings per share on revenue of $3.7 billion, which would represent year-over-year revenue growth of 103%. That's not a typo. Essentially the Street was looking for confirmation that Micron deserved its 2013 gains.

With first quarter EPS and revenue surging 165% and 120%, respectively, Micron management answered the call with authority. Equally, and perhaps more impressive than the 69% year-over-year jump in DRAM revenue, was the 7% sequential improvement in gross margin, which registered at 32%. This tells me that management has, in fact, begun to extract value from the Elipida acquisition.

This once unpredictable industry, now consolidated to four major suppliers, is starting to reveal that long-term profitability is indeed realistic. And with Micron growing earnings and cash flow at astronomical levels, if there were any doubts that the company can maintain its momentum against a surging Samsung (SSNLF), this, too, was put to rest with management raising guidance.

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