Micron Is Sitting In The Catbird Seat

There is also a growing demand for graphics products. eSports are a hybrid of sport and gaming, where a team or a single player competes in tournaments across various disciplines. According to Newzoo, the eSports industry was expected to generate 2017 revenue of over $100 billion, growing annually in the high single-digits. Cryptocurrency could also spur demand outside of graphics. Micron is poised to provide memory products or both eSports, cryptocurrency and the cloud. The potential upside in these markets is exciting.

Will The DRAM Market Hold Up?

As the company's revenues have exploded its margins have also increased due to a higher scale. Gross margins were 55% in Q1 2018 versus 25% in the year-earlier period. Increased margins amplified the impact of explosive revenue growth. On a product basis, DRAM was 67% of Micron's total revenue. DRAM revenue was up 88% Y/Y, representing explosive demand and positive pricing power. Bit demand increased Y/Y in the mid-20% range while asp was up in the mid-50% range.

A large part of Micron's fortunes are dependent upon the direction of DRAM prices. Micron has experienced extreme volatility in DRAM prices over the past few years. Per the company's most recent quarterly statement DRAM prices declined 35% from 2015 to 2016 and rebounded by 19% from 2016 to 2017. The question remains, "Will DRAM prices hold up?" Per DRAMeXchange, DRAM prices for the first calendar quarter of 2018 are expected to increase sequentially by low single-digits. Micron has an excellent management team that has always been upfront with investors on supply and demand for memory.  Management's estimates of future DRAM prices will be a key discussion item on the earnings call.

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