October 08, 2010, 11:43 AM — Wall Street almost always makes a stock pay when a company misses analysts' estimates for sales and earnings. Which is what Idaho-based computer chip maker Micron Technology (NASDAQ: MU) did in its fiscal fourth quarter.
Micron on Thursday announced Q4 revenues of $2.49 billion and net adjusted income of 30 cents per share, both well below consensus estimates of $2.68 billion in revenue and 40 cents per share in adjusted earnings.
Yet in late-morning trading on Friday, Micron shares are up 36 cents, or 5.1 percent, to 7.48. Earlier in the day Micron hit 7:59, its highest share price since Aug. 5.
How could Micron's stock being doing so well in the face of such big quarterly misses? It's hard to read the collective mind of Wall Street, but it appears two factors are at work:
1) Micron also reported its first annual profit in four years, with $1.9 billion for fiscal 2010, after losing an almost identical amount last year.
2) The company announced a 10-year patent cross-license deal with Samsung Electronics. Under terms of the agreement, Samsung will pay Micron $275 million in licensing fees, with a first payment of $200 million due by Oct. 12.
Of course, the third factor at work is Micron's current stock price relative to its perceived value. Shares have been trading close to their 52-week low of 6.12. Given Micron's strong turnaround, investors apparently feel the stock is a bargain, despite signs of weakening demand for processors.