This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Micron Stock Has 30% Upside on Cash Flow Growth, Solid Margins: Earnings Preview

NEW YORK (TheStreet) -- Shares of flash memory giant Micron (MU - Get Report) are on fire. The stock is up 42% year to date and 454% over the past two years. Investors have made a killing.

But with improved cash flow and margin expansion on the horizon, now is not the time to think about selling.

Unfazed by recent competitive pressures from Samsung (SSNLF), Micron management continues to push all of the right buttons, yielding a 98% jump in revenue in the most recent quarter. And with business synergies emerging from Micron's acquisition of Elpida Memory, these shares look set to reach $40 in the next 12 months, suggesting 30% upside from current levels.

After a period of weak volumes and low average selling prices, memory chip growth is once again on the uptrend. This is what Micron rival SanDisk (SNDK) understands -- and it's why SanDisk picked off Fusion-io (FIO) earlier this week.

IBM Fights for Respect and Relevance on Rough Seas of Investor Confidence

Why Big Car Companies Don't Give A Rat's Ass About Tesla

5 Reasons to Change Your Outlook on Emerging Markets

The improved economic environment is only a small part of the reason. Micron management never hesitated. They've been making moves amid the declining PC industry and soft average selling prices to grow both revenue and profits. And until there are meaningful signs of slowing down (e.g. cutting guidance), there is no reason to believe Micron's growth won't continue.

The stock's dominant performance over the past two years will carry great weight in investors' decisions. But what matters at this point is where Micron is heading. This is what investors must understand.

Micron's business is based on flash memory -- non-volatile storage technologies that require no power to retain data. They are used in devices like MP3 players, tablets and mobile phones. This is a market that Micron has perfected. And unless you believe that mobile devices are due for a steep decline, it's foolish to sell Micron at this point.

What's more, SanDisk's recent acquisition of Fusion-io highlights the growing market for solid-state drives for enterprise. The new and untapped frontier is the flash-transformed data center. Micron will have a new opportunity in this area to help companies better manage heavy data workloads.

These companies include some of the strongest names on Wall Street, like Facebook (FB), Hewlett-Packard (HPQ) and Apple (AAPL). Combined, these three contribute to 61% of Fusion-io's total revenue.

This is where Elpida will begin to pay off for Micron. As it stands, Apple was already using roughly 80% of Elpida's memory capacity when Micron made the deal. With a strong relationship already in place, Micron's ability to sway Apple away from SanDisk and Fusion-io won't be as difficult.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
MU $28.16 -1.80%
AAPL $126.39 -1.80%
FB $77.60 -1.50%
GOOG $532.34 -1.60%
TSLA $230.24 -0.12%

Markets

DOW 17,960.76 -109.64 -0.61%
S&P 500 2,094.70 -19.79 -0.94%
NASDAQ 4,944.2040 -72.7250 -1.45%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs