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Micron Jumps: What Wall Street's Saying

Stocks in this article: MU

NEW YORK (TheStreet) -- Shares of Micron Technology (MU) surged in pre-market trading, after the semiconductor and flash memory maker posted second-quarter results that beat Wall Street's estimates.

For the fiscal second-quarter, Micron earned 85 cents a share, excluding items, generating $4.11 billion, up 98% year over year. Analysts surveyed by Thomson Reuters were expecting 76 cents a share on $3.985 billion.

Boise, Idaho-based Micron noted that pricing for memory products, including DRAM and NAND, would decline by a low single-digit percent in the coming quarter, after pricing has been strong in recent memory, thanks to industry consolidation. In July 2013 Micron acquired bankrupt Japanese competitor Elpida Memory.

The company noted cash flows from operations for the second quarter were $1.39 billion, while spending $565 million in capital expenditures. Micron ended the quarter with $5.06 billion in cash and marketable securities.

During the quarter, NAND Flash revenue rose 11% sequentially, thanks in part to a surge in volume, up 35%, as prices weakened 18%. Revenues from DRAM products were essentially unchanged sequentially. Micron's gross margin was 34%, compared to 32% in the fiscal fist-quarter, aided by higher DRAM gross margin.

Shares of Micron rose in pre-market Friday trading, gaining 4.6% to $25.10.

Prices of DRAM chips, which Micron makes, have come down sharply amidst weakness in the personal computer market during recent years. Ergo, Micron has focused on DRAM used for smartphones and tablets to take advantage of devices like Apple's (AAPL) iPhone and iPad, as well as Google (GOOG) Android-based smartphones and tablets.

Analysts on Wall Street were by and large positive on the chipmaker following the results. Here's what a couple of them had to say:

Credit Suisse analyst John Pitzer  (Outperform, $30 PT)

"We would have preferred better  performance in GM (35.2% versus our estimate of 38.7% - driven by higher percentage of NAND mix) and a more clear roadmap for NAND GM improvement (High 20s versus industry average of 40-45% but in sum our STRUCTURAL  POSITIVE CALL was more than supported by MU's results. Memory continues to be in the early stages of a structural re-rating driven by slowing supply growth and improving demand mix. Specifically our analysis suggests a 20%/40% reduction in DRAM/NAND supply growth and Enterprise demand more than doubling on the heels of Data Analytic Applications -
Server DRAM grew 70% y/y on flat y/y server units. If correct, we see SUSTAINED EPS of at least $5 per share."

Sterne Agee analyst Vijay Rakesh (Buy, $30 PT)

"MU put up a solid FebQ with EPS of $0.85 (Street=$0.73), and tracking towards $3+ EPS annualized. Key was as MU noted stable to improving ASPs in both DRAM and NAND, with MayQ DRAM ASPs guided down only "low single digits" and improving q/q NAND ASP trends into MayQ (a positive for SNDK also) despite Hynix Wuxi now fully on line. With pricing stable in the weak Feb-MayQ, MU will have upside into a stronger Aug-NovQ with mobileDRAM, SSD, etc. Raising estimates and PT to $30."

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