Micron Technology jumps to yearly high on signs of recovery

Micron Technology Inc. (NASDAQ: MU) stock surged to a yearly high of $50 on Monday as semiconductor companies have been showing signs of recovery from the escalation of tariff tensions between the US and China. The recovery will continue to shower its grace on the companies for the balance of this year.

The semiconductor sector has previously been facing a slowdown arising from inventory issues, slowing smart devices demand, falling prices for memory chips, and trade tensions. This was reflected in Micron’s recent third-quarter results, which experienced a sharp fall in revenues and profit. The results, however, surpassed the estimates.

Micron estimates that capital expenditures in 2019 for property, plant, and equipment, net of partner contributions, to be about $9 billion, focused on technology transitions and product enablement. Delays in completion and ramping of new production facilities could significantly impact the company’s ability to realize expected returns on Capex.

The company intends to lower its capital expenditures in fiscal 2020 to help improve industry supply-demand balance despite seeing early signs of demand improvements. The management predicts demand to pick up in the second half of the year besides seeing inventory levels improvement.

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Micron is expected to be benefited by the demand for chips used in PCs, smartphones and gaming consoles during the end of the year, along with the ongoing 5G deployment. The company is likely to see an increase in the chips demand as more companies are focusing on artificial intelligence and cloud.

The NAND flash memory market is expected to grow at a compound annual growth rate (CAGR) of 0.78% to reach $62.28 billion by 202 from $30.31 billion in 2019, according to the Research and Markets. This is driven by increasing demands of smartphones having high features and incorporating video, camera, gaming, and music, along with the wearable gadgets.

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