Author | US Stock Research Society
Data Support | Pythagorean Big Data (www.gogudata.com)
After the trading session on June 30, Micron released its new quarter financial report. As the net profit growth rate dropped sharply, EPS was still slightly beyond expectations, but because its guidance was far inferior to expectations, it closed down 2.95% after the release of the financial report.
As of July 1, 2022, Micron's gained in the whole year of 21, and its 22-year increase of -42.21%, underperforming the same period of S&P 500 index ETF (SPY: -17.71%), Nasdaq 100ETF (QQQ: -27.78%) and Philadelphia Semiconductor Index (SOXX: -36.18%).
Micron (Micron) was founded in October 1978. It is headquartered in Boise, the capital of Idaho, USA. It is committed to providing global customers with a product portfolio of silicon materials and semiconductor solutions (such as DRAM, NAND and NOR flash memory). It is widely used in cutting-edge computing, consumer, mobile products, enterprise-level server and storage, network products, automobiles and other industrial fields. It is one of the world's largest semiconductor storage and imaging products manufacturers.
01 Financial report details: EPS exceeded expectations, revenue in line with expectations
Micron FY22Q3 revenue increased by 16.4% year-on-year to to US$8.642 billion (Guidelines 8.5-8.9 billion, expected US$8.63 billion), gross profit margin was 46.7% (Guidelines 46%-48%), net profit growth rate fell sharply, cycle turning point showed, diluted EPS was US$2.59 (Guidelines 2.23-2.43, expected US$2.44).
is divided by memory, and Micron's core business DRAM/NAND revenue accounts for 72.6%/26.5% of the total revenue respectively. Micron is in the industry leading position in both DRAM and NAND technology. :1-alpha DRAM and 176-layer NAND ramps lead the industry for several quarters, and this lead will continue to 23 years. Among them, 176-layer NAND accounts for more than 90% of the shipments of mobile NAND bits.
Currently, DRAM accounts for a relatively high proportion of the semiconductor industry, mainly dominated by Samsung , Hynix and Micron. At the same time, DRAM is also the main source of profit for various suppliers. DRAM revenue increased by 15.1% year-on-year, and increased by 9.7% month-on-month. This season, Micron also launched the industry's first 1-alpha LPDDR5, further consolidating its leading position in the 1-alpha LPDRAM field.
Despite the support of peak season effect and the increase in DDR5 penetration rate , the DRAM market is still inferior to the negative impact of the conflict between Russia and Ukraine, high inflation, etc., which has led to a weak demand for consumer electronics (mainly PCs and smartphones), which has led to an increase in overall DRAM inventory, driving DRAM prices to continue to fall .
NAND market is still 6 mainstream manufacturers participating in the competition, and Micron has a long-term and stable share of 10%-15% of the market share . NAND's revenue increased by 26.3% year-on-year and 16.9% month-on-month. Although high inflation and repeated impacts of the epidemic still exist in Q2, as the mainstream capacity of large data centers in North America continues to shift to high capacity, shipment scale is expected to rise; there may still be an oversupply trend in the second half of 2022, and prices are expected to increase further, but we still need to pay attention to the future trend of consumer electronics demand.
Computer and Network Business Unit (CNBU) recorded revenue of US$3.895 billion, an increase of 18% year-on-year and a 13% month-on-month increase; Mobile Business Unit (MBU) recorded US$1.967 billion, a decrease of 2% year-on-year and a 5% month-on-month increase; Storage Business Unit (SBU) recorded US$1.341 billion, a increase of 33% year-on-year and a 15% month-on-month increase; Embedded Products Business Unit (EBU) recorded US$1.435 billion, a decrease of 30% year-on-year and a 12% month-on-month increase.
points business, Micron has set revenue records in the automotive, industrial and network markets, as well as the solid-state drive field for data centers and clients. While end demand in the mobile, personal computer and consumer markets has weakened, the cloud, network, automotive and industrial markets are showing resilience. Cloud computing , data centers and automobiles have a good long-term growth prospect, but currently faces short-term headwinds due to the reduction in corporate spending.
Data center and client SSD revenues more than doubled year-on-year, both hitting record highs. Data centers are the largest memory and storage market today, and the rapid growth of AI and memory-intensive workloads ensures it will maintain strong growth over a decade.
Data Center's revenue this quarter has been growing continuously with a double-digit percentage, with a year-on-year increase of more than 50%. Driven by strong cloud capital expenditure growth, data center end demand is expected to remain strong in the second half of 2022. However, some OEM customers of currently hope to cut memory and store inventory of due to shortage of non-memory components and macroeconomic problems.
Two days ago, Bank of America Arya's report mentioned that it was worried about the spillover effect of consumer electronics on data centers/servers . This is more objective, that is, may experience data center headwinds in the short term .
Looking forward, management expects that will benefit from the growing demand in the automotive, data center and industrial terminal markets, and the company will further reduce its dependence on PC and smartphone businesses. It is expected that the annual compound growth rate of DRAM business will be between 14%-19% by 25 years, and the annual compound growth rate of NAND is expected to exceed 20% . The automotive market is expected to have strong long-term CAGR in DRAM and NAND, about twice that in the entire DRAM and NAND market.
02 Guide
Management guidance is far inferior to expectations : Micron expects adjusted revenue of US$6.8-7.6 billion (expected US$9.14 billion), gross profit margin of 42.5% (±1.5%), and diluted EPS of US$1.43-1.83 (expected US$2.57).
guidance is far inferior to expectations, mainly because Micron's expectations for China's revenue fell by about 30%, which directly led to a decrease in the company's consolidated revenue by about 10%. At the same time, PCs and smartphones combined represent half of the global memory and storage demand, while Micron is expected to see computer shipments drop by nearly 10% year-on-year in 22 years, a decrease of 30 million units compared with the forecast at the beginning of the year; smartphones also fluctuate by 10% : At the beginning of the year, it is expected that the annual growth rate of of smartphones will be around single digits, and now the downward adjustment growth rate of is about single digits. Sales of 5G devices are expected to grow this year, and smartphones may reach a 5G penetration rate of about 50%.
Micron and its competitors have always overproduced chips during economic prosperity, resulting in a large inventory of during economic downturns. Looking ahead, management believes that consumer demand (decreased demand including personal computers and smartphones) and inventory-related adverse factors will have adverse effects on the industry. The average inventory days of dropped from 113 days in the previous season to 109 days in the current season, which also verified this statement.
is currently in a downward cycle, but Micron's outlook remains optimistic, and long-term demand for memory and storage devices remains. With the accelerated growth of enterprise demand for digitalization, memory will play an increasingly important role in core-to-Edge computing. Micron's competitive advantage and execution capabilities can support profits in the downward cycle, and the company also has a strong balance sheet and capital return program, which has a certain attractive risk and return.
03 Valuation
Last look at the valuation: the current NTM PE is 8.5x, close to the bottom of 5 years (end of 2018). Judging from Micron's management guidance, the year-on-year growth rate of revenue has been declining (the semiconductor cycle has declined), and has dropped from 36.6% in FY21Q4 to -13% in FY22Q4's guidance, and it will not be possible to reverse the trend of decline in revenue growth in the short term (on June 16, Samsung asked all business groups to suspend new purchase orders, covering multiple product lines including mobile phones, panels, memory, etc. Samsung informed suppliers that the inventory needs to be closely reviewed, and the shipment volume of some parts in July has been cut by 50%.
Overall, the overall valuation of semiconductors is already near the bottom. You can look at the Q2 kill performance and guidance to determine the strategy. In addition, Micron expects to mass-produce 1-β DRAM in 23 years; the penetration rate of DDR5 will also explode in 23 years, and is expected to increase from 25% in 22 years to 55% (the demand for renewal brought by process upgrades), which will bring about a significant increase in quantity and potential ASP (both increase in volume and price). The market generally speculates expectations two quarters ahead of schedule, so Micron's turning point may be at the bottom of Q3 - Q4.
Note: This article was originally created by the US Stock Research Society team. Please indicate the source when reprinting, thank you!
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