Posts Tagged ‘Micron’

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Raymond Jones up Micron Target to $40

Posted: June 20, 2014 by mattmargolis24 in Uncategorized
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Raymond James upped its price target from $30 to $40 late yesterday. The analyst at Raymond Jones is seeing continued tight supply and demand for Micron’s products. The firm maintains GAP EPS estimates of $2.20 in 2014 and $2.85 in 2015.

Baird joins the growing list of firms that, who recently raised price targets on shares of Micron. Over the last week Bank of America raised it’s Micron PT to $40, Credit Suisse raised its PT to $50, Baird raised its target to $42 and Nomura raised its PT to $40.

Disclosure: I am long shares of Micron and maintain a $61 price target that was issued in April. Get in early before the rest of my market catches up to my early “buy” calls on stocks.

My individual portfolio of stocks is up over 397% since the beginning of 2013. Over each of the last 17 months my portfolio has returned a positive return 88% of the time. That means my portfolio of stocks provided a positive monthly return 15 out of the last 17 months! My last stock pick is up 10% in just over a week since I made the pick public to my paid subscribers. It’s not too late to get in on the fun, sign up today!

Nomura ups Micron Target to $40 from $30

Posted: June 12, 2014 by mattmargolis24 in Uncategorized
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Earlier today, Nomura maintained its buy rating on shares of Micron and upped its price target on shares of Micron from $30 to $40.

Nomura joined other firms, who recently raised price targets on shares of Micron. On Wednesday, Bank of America raised it’s Micron PT to $40 and Credit Suisse raised its PT to $50.

Disclosure: I am long shares of Micron and maintain a $61 price target that was issued in April.

For in-depth coverage on my top picks check out my PTT Research Forensics Newsletter and be the first to know my next move!

Credit Suisse maintains an outperform rating on shares of Micron and ups target from $30 to $50.

Shares of Micron are trading at over $30, which is the highest levels seen in over 10 years.

Disclosure: I am long shares of Micron and maintain a $61 price target that was issued in April.

For in-depth coverage on my top picks check out my PTT Research Forensics Newsletter and be the first to know my next move!

Bank of America decided to change it’s tune and join the bullish analyst party on shares of Micron. Less than 3 months ago Bank of America did not believe that EPS could go much north of $2 per share.

“Our Underperform rating (vs. a Buy until 21 Nov 2013) is based on a massive stock rally exceeding our up-cycle fair value (as of 19 Dec), a bigger threat from competitors’ (Hynix’s new fab plan, etc.) and weaker-than-expected chip prices (led by NAND). We also worry about the greater downside to DRAM spot and execution risk for new tech deployment (2xnm inferior to Korean peers). We disagree with the bullish consensus, as EPS growth is unlikely to be strong once it hits $2.

Bank of America has officially lifted it’s “underperform” rating and $19.10 target and replaced it with a buy rating and a $40 target.

“We upgrade our rating on Micron from Underperform to Buy with a new PO of $40.0 (FY15E implied P/E 14x, PBR 3.1x). The stock has already moved up strongly (up 33% YTD) but we think further upside will occur,In our view, key catalysts are solid chip pricing environment (tight supply) and cost competitiveness.

“Our EPS revisions for FY15-16E are c.50% on average at higher/lower ASP/cost. We also expect dividend payment from FY15-end. Lower cyclical risk and higher shareholder return lead to bigger EVA (WACC down vs ROE up); clearly a different cycle.”

Shares of Micron are trading at over $30, which is the highest levels seen in over 10 years.

Disclosure: I am long shares of Micron and maintain a $61 price target that was issued in April.

For in-depth coverage on my top picks check out my PTT Research Forensics Newsletter and be the first to know my next move!

by Matt Margolis

Yesterday RBC Capital upgraded Micron to Outperform and raised its price target from $27 to $34.  I want to thank them joining the upgrade party but they are 7+ weeks late.  In my April 1, 2014 post I gave Micron a $61 – 12 month target and my target was driven by the Supply and Demand of the Memory Industry.

If anyone follows the share price of Micron Technology (MU) I’m sure your first thought might be, “this stock already doubled and almost tripled over the last 12 months.”  The answer is yes the Micron has gone from $9.23 on April 1, 2013 to $23.66  as of today’s close on March 31, 2014 (a whopping increase of 2.56x or 156% over the last 12 months).    I’m going to argue that the supply and demand situation along with the macro economic environment driving the memory industry will drive Micron’s share price up another 156% over the next 12 months.  I am officially initiating coverage on Micron and issuing a $61 – 12 month price target.

 

RBC Capital cites tight industry supply and improved margins behind its Micron’s upgrade:

 “On the DRAM side, higher margin levels are likely sustainable given mix-shift movements,upcoming 20nm cost-downs, fundamental industry shifts in participants, and tight industry supply (low channel inventories).”

 

The positive nature of the memory industry could result in Micron evaluating a cash return strategy for shareholders in the coming years.”

 

Our view remains that the memory industry is benefiting from the law of diminishing cost savings, which is expected to result in a multi-year cycle of higher revenues and operating margins in both DRAM and NAND.

If RBC Capital had listened to Micron’s conference call or read the transcript they would have upgraded the shares about 7 weeks ago.  Micron made this comment during the April conference call (courtesy of Seeking Alpha)  regarding the memory industry.

Our outlook for memory industry conditions remains favorable. We believe the current industry structure is fundamentally changed and we can now manage our business focused on return based capital and supply decisions which was not always possible in the past.

Final Thoughts

Subtle points and comments from management go largely unnoticed, in this case Micron tipped its hand during the April conference call that memory industry conditions remain favorable and the industry has “fundamentally changed” from the past. Micron does not typically give out analyst handouts regarding EPS or revenue estimates, but Micron’s comment was one of the most bullish comments you could hear from a significant memory industry player.

If you waited for yesterday’s upgrade of Micron technology you already missed a 17% return from my initial coverage of the stock at $23.66.   I have an average cost basis in Micron of under $10, but I have been monitoring the memory industry and I was waiting to see if any new supply would come online in 2014 to disrupt the current memory industry.  Today’s memory industry favors suppliers, which will only continue to increase margins and bottom line earnings per share for Micron for the next 6 to 12 months.  As with any investment, you need to closely monitor the marketplace and see the train coming before anyone can hear it.

Full Disclosure I am long MU and I have joined PTT Research.  My premium Forensics Newsletter is scheduled to launch on June 2nd.  The premium paid service option will grant my paid subscribers exclusive content weeks before my analysis is published on Seeking Alpha, the Obscure Analyst blog or any other website.  Another advantage of PTT is the subscriber Forum that allows sharing of ideas and analyst Q&A.

Micron delivered their Q2 2014 results today and also reaffirmed that they will begin to ramp up volume production of their DDR4 memory chips during the quarter ending May 2014.  Additionally, Micron also reminded investors they received a $250m deposit from a customer in Q1 2014 associated with a long-term DRAM supply agreement.  Micron’s CEO and CFO both indicated that DRAM inventory is currently “very tight” and it seems more clear that Apple made the $250m deposit was made to secure a multiyear supply of DRAM memory chips that will be very difficult for customers to get their hands on.

I recently put together substantial evidence that Apple was going to showcase Micron’s LPDDR4 DRAM memory across Apple’s 2014 Hardware portfolio.  The comments today from Micron’s management confirmed they will begin to ramp up production of their DDR4 chip by the end of May.  The ramp timing  continues to support my thesis that the DDR4 chip will make its way into the iPhone 6 that will begin to be manufactured in May according to recent reports.  My previous conclusion is below:

Conclusion – Micron’s LPDDR4 DRAM Memory will Arrive on Apple’s Hardware in 2014

Apple is a current DRAM customer of Micron Technology, having last used Micron’s LPDDR3 DRAM memory in 2013.  Micron presented detailed benefits and product highlights regarding their LPDDR4 DRAM Memory technology almost a year ago.  Furthermore, just yesterday Micron’s Vice President of Wireless Solutions Marketing published an article highlighting the benefits of Micron’s next generation DRAM LPDDR4, which tells me this technology is ready for the big show.   Lastly, Micron received a mystery payment of $250m from one customer that was reported during their Q1 2014 conference call and their 10-Q indicates that the payment was  “for product to be supplied through September 2016″.

Apple is in an arm’s race to improve the performance of their mobile, tablet and ultrabook devices and improve overall battery life.   There appears to be little doubt that Apple is going to be showing off Micron’s LPDDR4 DRAM memory across their 2014 iPhones, Macbook and Tablets.  You can take my word for it that Apple users are going to love how “lightning quick” the 2014 devices will be compared to the 2013 devices.

 

Full Disclosure: I am long Micron and have no plans to buy or sell any holdings in the next 72 hours.

Micron beats Q2 top and bottom line estimates

Posted: April 3, 2014 by mattmargolis24 in Micron Technology
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Micron Technology beat revenue consensus by $113m and EPS (non-GAAP) by 11 cents per share. Share have ranged from flat to up $1.15 after hours. The stock closed at $24.00 during the regular session.

<Micron Technology, Inc., Reports Results for the Second Quarter of Fiscal 2014

BOISE, Idaho, April 3, 2014 (GLOBE NEWSWIRE) — Micron Technology, Inc., ( Nasdaq:MU) today announced results of operations for its second quarter of fiscal 2014, which ended February 27, 2014. Revenues in the second quarter of fiscal 2014 were $4.11 billion and were 2 percent higher compared to the first quarter of fiscal 2014 and 98 percent higher compared to the second quarter of fiscal 2013.

GAAP Income and Per Share Data — On a GAAP(1) basis, net income attributable to Micron shareholders in the second quarter of fiscal 2014 was $731 million, or $0.61 per diluted share, compared to net income of $358 million, or $0.30 per diluted share, in the first quarter of fiscal 2014 and a net loss of ($286) million, or ($0.28) per diluted share, in the second quarter of fiscal 2013.

Non-GAAP Income and Per Share Data — On a non-GAAP(2) basis, net income attributable to Micron shareholders in the second quarter of fiscal 2014 was $ 989 million, or $0.85 per diluted share, compared to net income of $881 million, or $0.77 per diluted share, in the first quarter of fiscal 2014. For a reconciliation of GAAP to non-GAAP results, see the accompanying financial tables and footnotes.

Revenues from sales of Trade NAND Flash products were 11 percent higher in the second quarter of fiscal 2014 compared to the first quarter of fiscal 2014 primarily due to a 35 percent increase in sales volume offset by an 18 percent decrease in average selling prices. Revenues from sales of DRAM products were essentially unchanged in the second quarter of fiscal 2014 compared to the first quarter of fiscal 2014 as both sales volumes and average selling prices remained stable. The company's overall consolidated gross margin was 34 percent in the second quarter of fiscal 2014 compared to 32 percent in the first quarter of fiscal 2014 as a result of a higher DRAM gross margin.

Cash flows from operations for the second quarter of fiscal 2014 were $1.39 billion, while investments in capital expenditures were $565 million. The company ended the second fiscal quarter with cash and marketable investments of $5.06 billion.

by Matt Margolis

If anyone follows the share price of Micron Technology (MU) I’m sure your first thought might be, “this stock already doubled and almost tripled over the last 12 months.”  The answer is yes the Micron has gone from $9.23 on April 1, 2013 to $23.66  as of today’s close on March 31, 2014 (a whopping increase of 2.56x or 156% over the last 12 months).    I’m going to argue that the supply and demand situation along with the macro economic environment driving the memory industry will drive Micron’s share price up another 156% over the next 12 months.  I am officially initiating coverage on Micron and issuing a $61 – 12 month price target.

 

What is DRAM?

One of the main types of memory that Micron specializes in is Dynamic random-access memory (DRAM).  DRAM is a type of random access memory that stores each bit of data in a separate capacitor within an integrated circuit. Since real capacitors leak charge, the information eventually fades unless the capacitor charge is refreshed periodically. Because of this refresh requirement, it is a dynamic memory as opposed to SRAM and other static memory.  The main memory (the “RAM”) in personal computers is Dynamic RAM (DRAM), as is the “RAM” of home game consoles (PlayStation, Xbox 360 and Wii), laptop, notebook and workstation computers.

 

DRAM Consumption

DRAM consumption is driven by Mobile (35%) of the market and Servers (20%) of the DRAM market.  Mobile DRAM consumption will grow at a 60-70% YOY clip in 2014 and server consumption will increase about 40% YOY.   The next significant piece of DRAM consumption is Networking, which represents approximately 10% of the marketplace and that is growing 30-35% YOY driven by LTE build outs in China.  The last piece of the DRAM market is PC’s and that area is growing at a 5% YOY rate at best.  I have only been following Micron for the last 4 years but I have very excited about how Micron is and will continue to be a very big winner in the smartphone revolution that is still in its infancy.

DRAM, the Past, the Present and the Future

Micron’s DRAM business used to be tied to PC sales and PC’s have dominated the DRAM industry consumption since the 1980s but by 2015 Tablets and Mobile devices are expected to consume more DRAM than PCs.  If you don’t this has been a remarkable shift in consumption, then you read to check out the chart below courtesy of IHS Technology.

Screenshot - 3_31_2014 , 8_35_34 PM

Screenshot - 3_31_2014 , 10_10_08 PM

Global mobile smartphone sales just surpassed non-smartphone sales in 2013 with a total market size of 1.8B handsets sold.  A new report published today from IGR estimates that mobile sales will rise from 1.8B to 2.6B units by 2018 and smartphone sales will account for 85% of 2.2B units sold in 2018 up from 0.9B or just over 50% of mobile units sold in 2013, representing an increase of 1.3B annual smartphone unit sales by 2018.  Smartphone sales are forecasted to increase from 900m in 2013 to 2.2B in 2018 representing an annual growth rate of 20%.  On top of the unit growth rate, the amount of DRAM memory bits consumed in smartphones and tablets will continue to increase as mobile devices and tablets become more powerful and continue to perform a larger portion of our computing tasks each day.

The mobile DRAM marketplace is currently dominated by only 3 players, Samsung (48.9%), Hynix (25.9%) and Micron (23%) during Q4 2013.  Samsung is mostly a supplier to themselves and Micron through their acquisition of Elpida has Apple as a mobile customer.  Micron was the #4 player in the DRAM space but after they acquired Elpida for pennies on the dollar they jumped #3 and are currently in a horse race with Hynix for the #2 spot.

Conclusion

Micron’s DRAM revenue accounted for 50% of Micron’s record $4,042 million of sales recorded in Q4 2013.    The DRAM marketplace is composed of just 3 significant players and the supply and demand equation is now in equilibrium.  The 20% forecasted growth rate of smartphone sales through 2018 will continue to drive mobile DRAM bit growth even as the PC market continues to survive on little to no growth for the foreseeable future.   Micron and the memory space may have been exposed to significant price fluctuation but in a market with only 3 major players and a significantly high cost of capital to enter the markets place, the supply and demand picture looks safe and so does Micron’s profits for the foreseeable future.  Wall street analysts average earnings estimate is $2.98 per share in 2014 with a low estimate of $2.20 and a high estimate of $3.44.  Looking ahead to 2015, the average wall street analyst estimate is $2.96 with a low estimate of $1.40 and a high estimate of $3.88.

Micron reported earnings of $0.77 per share in their Q1 2014 quarter against the average wall street estimate of $0.43 per share meaning Micron exceeded analyst estimates by $0.34 or 79%.  The wall street analysts still think Micron is supplying memory to the PC marketplace and they just don’t understand the smartphone and tablet revolution that will drive Micron sales and earnings for the next 5 plus years!

Shares of Micron were up 8% today and today’s action is just the beginning of a terrific finish to 2014 for shares of Micron.  The analysts are expecting Micron to earn $0.74 in Q2 2014 when they report on Thursday after the closing bell, but investors should expect another significant beat to Micron and additional price target increases from wall street.  Micron should be valued at 15-20x 2015 earnings estimate of $2.98 per share, which would value the company at $45-60 today.  I feel confident Micron will earn over $4.00 a share in 2014 and will challenge $5.00 per share in 2015.  The Micron analysts are afraid to get in front of this memory earnings freight train, but the pure supply and demand economics along with macro economics surrounding smartphone conversions from non-smartphone mobile devices, will continue to fuel Micron’s earnings and share price for years to come.  My recommendation is to buy Micron in advance of their Q2 2014 earnings announcement Thursday after the closing bell and to hold this volatile security for the next 12 months and enjoy a 165% return alongside me.

 

Full Disclosure: I am long MU and have no plans to buy or sell any holdings in the next 12 months