Micron: DRAM Market a Goldmine, Raising Fair Value

Third-quarter revenue was $7.8 billion, up 6% sequentially, led by a 33% gain in cloud DRAM sales and record automotive revenue in the embedded business unit that was up 8%. DRAM sales rose 6% over the prior quarter to $5.5 billion, with the aforementioned server gains partially offset by lower PC DRAM revenue. Despite storage business unit sales falling 9% sequentially, we were pleased to see record SSD revenue, which accounted for the majority of SBU. NAND accounted for 25% of total revenue and rose 8% sequentially led by a 24% increase in cloud SSD sales. Gross margins rose to 60.6% from 58.1% last quarter, as Micron enjoyed solid ASP increases coupled with cost per bit reductions in both DRAM and NAND.

Fiscal fourth-quarter sales are expected to be at a midpoint of $8.2 billion, which implies a sequential increase of 5%. We think DRAM prices will begin to plateau, while industry reports have already noted NAND pricing declines, which we foresee impacting Micron’s NAND results during its fourth quarter.

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