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Micron Slips After Solid Third-Quarter Earnings as Costs and Capex Weigh

'Micron’s business is healthier and more robust than ever,' says CEO Sanjay Mehrotra.

Micron Technology  (MU) - Get Micron Technology, Inc. (MU) Report shares ticked lower Thursday as investors looked at higher input costs and capital investment plans from the chipmaker that offset a solid third quarter and a robust near-term outlook.

Micron said diluted earnings for the three months ending in May, the company's s fiscal third quarter,. were pegged at $1.88 per share, well ahead of the Street consensus forecast of $1.72 per share, as group revenues surged 36% to $7.24 billion.

Looking into the current quarter, Micron forecast $8.2 billion in sales and earnings in the region of $2.30 per share, but noted that COVID-related costs would rise and capex would likely increase to around $13 billion in the coming fiscal year as the group invests in new products, including the next generation DDR5 DRAM chip, while meeting consistently increasing customer demand.

"Micron’s business is healthier and more robust than ever, and we are energized to seize the opportunities ahead at a truly exciting time in the semiconductor industry. We are also leveraging our success to deliver results for all our stakeholders," CEO Sanjay Mehrotra told investors on a conference call late Wednesday. 

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"Across the board, almost across all end markets, we are seeing strong demand. In fact, in the industry, there is unmet demand," he added. "When you look at all the acceleration of the digital transformation and the surge in demand that has occurred, and on top of it, impose semiconductor industry shortages that are leaving a lot of the unmet demand across multiple industries here, all of that is really leading the customer ecosystem as well as us, the suppliers, to really absolutely prepare for supply chain so that we can meet the demand."

Micron shares were marked 4.8% lower in early trading Thursday to change hand at $80.92, a move that would trim the stock's year-to-date gain to around 7.6%. 

The company also said it would sell a Lehi, Utah, fabrication plant to Texas Instruments  (TXN) - Get Texas Instruments Incorporated Report for $1.58 billion, consisting of $900 million cash from TI and $600 million from tools and other assets.

"Micron could not have articulated our own positive thesis any better in terms of a constrained environment into 2022 in both DRAM and NAND (we did not call out the latter), driven in part by the transition to DDR5 and the accompanying requirement for a higher die size,' said BMO Capital Markets analyst Ambrish Srivastava, who carries an outperform rating with a $110 price target on the stock. 

"Conversely, while to be expected at some point, as competitors begin to ramp EUV for DRAM, what we did not see coming was the timing of the EUV technology spend starting in FY22, and the consequent large increase in CapEx for FY22,' he added.