Overview
A leader in the semiconductor industry, Micron has reported outstanding results for the fourth quarter of fiscal 2021. Micron is a strong pick for a diversified portfolio if you are a long-term investor.
Past Problems
Micron has always had fluctuating common stock prices due to industry challenges like competitive supply and demand cycles.
Furthermore, in mid-2018 and mid-2019, Micron had significantly overestimated server NAND demand. In mid-2019, the company also significantly overestimated DRAM demand, leading to a surplus of production of NAND and DRAM. This caused inventory overhang and a decline in average selling prices (ASPs) that persists to this day.
Financials
The computer memory and data storage company will be facing some challenges due to supply constraints for PC assembling components and IC components. We can expect downward trends for Micron stock for the next couple of months.
Despite these challenges, Micron’s financials look promising. As of the fourth quarter of fiscal 2021, Micron has made a revenue of $27.71 billion compared to $21.44 billion for fiscal 2020. In comparison, its operating expenses were $4,140 million for the fiscal year 2021.
According to the company’s Technology President and CEO Sanjay Mehrotra, the demand outlook for 2022 is strong. The company has ended the fourth quarter of fiscal 2021 with many milestones, including establishing NAND and DRAM technology leadership, starting a quarterly dividend, driving record revenues spanning multiple markets.
Risks
As discussed above, Micron still has volatile ASPs. Sometimes, ASPs for Micron have been lower than their manufacturing costs, which can have a large impact on the company. However, Micron’s new products such as the GDDR6X will protect the company from downsides related to ASP fluctuation.
Other risks to look out for include: significant competition with other semiconductor storage and memory companies such as Samsung, SK Hynix, and Intel; supply chain risks, since Micron buys much of its supplies and equipment from outside of the United States and produces a significant percentage of its products in Singapore, Japan, Taiwan, and China; and macroeconomic factors such as COVID-19, which can decrease demand for various products.
Final thoughts
Micron is a solid choice for your portfolio if you are a long-term investor. It is built on a solid foundation, so it will be able to withstand most risks.