Micron Technology, Inc. (MU), Apple Inc. (AAPL): A Trend in Technology and a Simple Way to Profit From It

When there’s a clear cut trend that can be easily seen, it becomes easier to profit from it. An ongoing trend in the technology industry is the rise in the prices of NAND and DRAM (dynamic random access memory) this year. After facing a period of depressed prices last year, manufacturers decided to cut down supply and this has yielded positive results.

Back in the black

Hence, there’s nothing surprising in Micron Technology, Inc. (NASDAQ:MU)’s latest earnings report and the stock’s astronomic 123% appreciation this year, as rising NAND and DRAM prices have helped its resurgence after a torrid 2012. Micron Technology, Inc. (NASDAQ:MU)’s latest third-quarter report is indicative of the strength in prices, and management’s commentary tells us that the good times are far from over.

The solid appreciation in prices, coupled with better demand, helped Micron Technology, Inc. (NASDAQ:MU) post a profit in the third quarter. The company earned a profit of $43 million, or $0.04 per share, compared to a loss of $320 million, or $0.32 per share, in the year-ago period. While this turnaround is indeed impressive, Micron Technology, Inc. (NASDAQ:MU)’s revenue improved slightly to $2.3 billion from $2.2 billion last year. Thus, it’s evident that stronger pricing led to earnings growth and contributed to better margins.

Improvements all around

The most important thing is that this trend of strong prices is set to continue, and the rise in demand for Micron Technology, Inc. (NASDAQ:MU)’s products should help it deliver even better results. For instance, a 16% jump in the average selling prices (ASP) of DRAM along with a 6% jump in volume propelled revenue from the segment 23% higher, while an 8% increase in NAND flash prices led to a 7% jump in revenue from this segment.

Unsurprisingly, Micron Technology, Inc. (NASDAQ:MU)’s gross margin improved to 24% in the quarter from 18% in the previous one. But then, there’s surely more to come. While a slowdown in the PC industry might have hurt sales of DRAM chips, memory makers have adjusted their supply accordingly so that ASP isn’t hurt. Throw in the spike in demand for mobile DRAM, and it becomes pretty much clear that the demand is there but in another form.

Micron is benefiting from these factors, and it expects further improvement in prices going forward. The company is projecting a mid-to-high single-digits jump in DRAM prices in the ongoing quarter while costs are expected to remain flat. This indicates that further margin improvement is on the way in the fourth quarter, and this should trickle down to the bottom line.