Computer memory maker Micron (NASDAQ: MU) stock tumbled 16.5% through 9:45 a.m. ET Wednesday despite the company reporting earnings that equaled or exceeded the targets Wall Street had set for it in fiscal Q1 2025.
Expected to report $1.77 per share in profit on $8.7 billion in sales, Micron actually reported $1.79 per share in profit and sales of $8.71 billion — beating on both top and bottom lines, if only just barely.
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Not all Micron’s news was good. The company may have earned $1.79 per share adjusted for one-time items (i.e. non-GAAP). But Micron’s earnings when calculated according to generally accepted accounting principles (GAAP) were only $1.67 per share.
Still, this was better than the GAAP net loss Micron reported in Q1 last year, and more than double the GAAP profit Micron earned as recently as last quarter, fiscal Q4 2024. Micron’s sales also surged 85% year over year in Q1, led by astounding growth in the company’s data center business (meaning cloud computing and artificial intelligence). Data center revenue grew 40% quarter over quarter, and 400% year over year!
CEO Sanjay Mehrotra highlighted Micron’s data center business, now producing more than half the company’s total revenue, and said Micron continues to gain market share in this “strategically important” business.
So why are investors selling Micron stock today? In a word: guidance.
Micron told investors to expect sales of $7.9 billion in fiscal Q2 2025 at a gross profit margin of about 37.5%, leading to earnings per share of roughly $1.26 (GAAP) or $1.43 (non-GAAP). And here’s why that’s a problem:
Wall Street was expecting Micron to promise much more: $9 billion in revenue and $1.97 per share in profit. Even assuming these are non-GAAP numbers, Micron just told us that it will miss this forecast by about 28%.
Regardless, even what Micron is still promising — $1.26 — works out to a 200% increase in per-share profit year over year. Priced under 25 times earnings today, Micron stock looks cheap.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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