The Zhitong Finance app observed that the stock price of MU.US (MU.US) has been in a narrow fluctuation range for several months, often fluctuating up and down within this range, but the stock eventually broke through this range.

Micron closed last week with the highest single week in 20 years, and November is expected to close with the highest single month in 20 years. The strength of Micron's stock price seems likely to continue to melt until 2021 and may sprint towards its highest closing price in history. The all-time high for Micron was on July 14, 2000, when it closed at $96.56.

Micron is a major manufacturer of data storage, including DRAM, flash memory, and solid-state drives. These projects are core components of modern digital devices and data centers. The procurement of such semiconductors was already widely commercialized decades ago. As a result, Micron's performance is highly dependent on the price and demand of memory chips.

Despite Micron's excellent equipment, the company's stock price faced incredible difficulties during the year following the health incident. After appreciating in value along with the overall recovery, it was difficult for the company to escape the price of around $50 per share. This month, Micron finally broke through this resistance point.

Health events have left many markets uncertain, yet demand for data center capacity and hardware to support changes in work and school environments continues to grow. It's strange that Micron's stock price has remained relatively stable for nearly three-quarters of this year, especially at a time when semiconductor demand is strong.

The following two-year weekly closing price chart shows that the company is actually close to the high before the health incident.

Now that Micron has finally broken away from its current resistance level, its rise is bound to continue and is likely to accelerate. This is because Micron's market is still strong.

Recent financial conditions

Micron recently announced revenue for the previous quarter of about US$6.1 billion, up 11% month-on-month and 24% year-over-year. The company's total revenue for fiscal year 2020 ended last quarter was $21.4 billion, down 8% from 2019. Revenue growth for the quarter was driven by strong DRAM shipments, while Micron said the quarter's revenue came from the latter part of the quarter due to the timing of customer demand. This should indicate that Micron is likely to have a strong start to the quarter.

Revenue from DRAM was $4.4 billion, accounting for 72% of total revenue. DRAM revenue grew 22% month-on-month and 29% year-over-year. DRAM revenue for the entire fiscal year was $14.5 billion, accounting for 68% of total revenue. NAND's revenue was approximately $1.5 billion, or $6.1 billion for the year.

The Computer and Networking business unit's revenue was approximately $3 billion, up about 36% year over year and 59% year over year. In this fiscal year, CNBU's revenue was $9.2 billion, down 8% from the previous fiscal year. The mobile business unit had revenue of $1.5 billion for the quarter and $5.7 billion for the full year.

Micron's consolidated gross margin for the second quarter was 34.9%, up about 170 basis points from the previous quarter. Non-GAAP earnings per share were $1.08, up from $0.82 in the third quarter and $0.56 in the same period last year. In fiscal year 2020, Micron earned $2.83 per share.

Micron also bought back about 824,000 shares in the previous quarter at an average price of 49.91 US dollars. At the end of the quarter, the company held $9.3 billion in cash, total liquidity was around $11.8 billion, and total debt was $6.6 billion.

Given Micron's recent strong performance and rising profit margins, it seems likely that the company will perform better in the next few quarters. The current cycle of 5G and new consoles is a huge driver, as is the deployment of telecommuting and education. Strong demand is likely to match cost reductions associated with DRAM and NAND production. This appears likely to lead to continued expansion in profit margins and an improvement in free cash flow.

Potential risks

As sellers of essentially commercialized products, there is always a possibility that demand will fall, or that market capacity will cause supply to exceed demand, thereby lowering prices. The price pressure of commercialization does not appear to be a recent issue, as data center demand is strong, consumer demand is normalizing, and production increases by existing competitors or new entrants will be difficult in the current environment.

Another issue that may affect Micron is its stock-based compensation. The company has a history of buying large stocks from executives as part of its compensation plan. This will dilute shareholders' equity and may also put selling pressure on well-paid executives.

Reasonable stock-based compensation may leave the board vulnerable to activist investors. The market may respond positively to activist investors, but concerns about corporate waste may also hurt stock valuations.

Micron's stock price may be volatile. It sometimes multiplies within a year or two, and sometimes it halves just as fast. This is because of the commercialization nature of these chips. There is always a risk that Micron may produce a large number of unsellable chips due to future market oversupply or collapse of demand.

Micron's recent quarterly revenue forecast is US$5.2 billion, down 14% from the previous quarter. Considering the potential impact of 5G on Micron in the next few quarters and the continued demand for distance education and office equipment, Micron's performance is likely to break this forecast and perform well in the next few quarters.

conclusions

Micron's stock price is breaking through the recent narrow fluctuation range. The stock has been in this range since the beginning of this summer. Micron's strong performance in the market makes it likely that the company will continue this trend and rise before the end of the year. The end of this year was also a period of strong trend in stock market history. In the coming months, Micron is expected to outperform the market and continue to strengthen throughout 2021. It also reached a record high before the end of this round of economic growth.