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Micron higher on CS Focus List addition, Samsung DRAM report

  • Three weeks after hiking its Micron (MU +3.5%) PT to $50, Credit Suisse is planting itself even more firmly on an increasingly crowded bandwagon by adding the memory giant to its Focus List.
  • CS praises a valuation of 9.8x EPS, and sees new products and margin expansion driving future EPS growth.
  • Separately, Taiwan's Economic Daily News reports Samsung (SSNLF, SSNGY) has told clients it plans to raise DRAM contract prices by 10% starting in July.
  • The paper also states spot prices for mainstay 4Gb DDR3 DRAM chips (widely used in PCs) could reach $4.60 in Q3. DRAMeXchange showed an average Friday price of $4.255, following a Q2 gain of nearly 20%.
  • Previous: Micron jumps post-earnings
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Comments (17)
  • Tai Yu
    , contributor
    Comments (490) | Send Message
     
    There have interesting discussions on how likely MU can raise its ASP. Samsung's move may increase that possibility and CS's blessing may help push stock higher.

     

    I believe MU may have just just completed its correction (as it did 6 times in the past 7 quarterly earning release) and may be heading higher.
    30 Jun, 10:12 AM Reply Like
  • Retired Securities Attorney
    , contributor
    Comments (2688) | Send Message
     
    Here we go! Finally.
    30 Jun, 10:36 AM Reply Like
  • AmoCan
    , contributor
    Comments (62) | Send Message
     
    Micron didn't go anywhere! The naysayers have been talking about the correction for over a year now lol They missed out. This stock is riding to $50.
    30 Jun, 02:22 PM Reply Like
  • sigmacad
    , contributor
    Comments (2) | Send Message
     
    glad micron is coming back!
    30 Jun, 10:55 AM Reply Like
  • Mace Meier
    , contributor
    Comments (114) | Send Message
     
    Finally, all the stories about dram being on allocation, Sammy has the guts to do this. Micron's guidance for Q4 dram ASP's staying flat should be getting raised on this announcement. I get the feeling that MU management isn't strong enough to stop getting pushed around by their customers. Of course, we don't know what kind of long term contract was in place with Apple when they bought Elpida, and maybe that's why the ASP guidance was flat. My gut feeling is that MU management is fairly spineless when it comes to raising prices.
    30 Jun, 01:48 PM Reply Like
  • Retired Securities Attorney
    , contributor
    Comments (2688) | Send Message
     
    Mace,

     

    I have a slightly different slant.

     

    I think that Micron management wants to be in a position to say to its customers that it's just reacting to the market. Micron does not want to take the flack of being the leader. For political reasons, it's better for Micron to say that Samsung is the one doing it and it is just reacting.
    30 Jun, 02:12 PM Reply Like
  • Carolina1954
    , contributor
    Comments (173) | Send Message
     
    Maybe an even simpler explanation is that Micron has low-balled guidance because it isn't quite ready yet for the stock price to ascend, inflating the already embarrassingly large cost of buying in remaining converts.
    30 Jun, 03:45 PM Reply Like
  • skydivn
    , contributor
    Comments (15) | Send Message
     
    U.P.O.D. the next 2 quarters should smoke.
    30 Jun, 05:50 PM Reply Like
  • rg14
    , contributor
    Comments (57) | Send Message
     
    rsa,
    I'd agree with your assessment of the situation and how micron would react. In fact, they would not be playing along with the oligopolistic 'friends' if they did not. So a spineless (and business savvy) response from micron would be to raise prices!
    30 Jun, 02:45 PM Reply Like
  • Matus Majernik
    , contributor
    Comments (3) | Send Message
     
    Great stock with great future.
    30 Jun, 04:38 PM Reply Like
  • Tai Yu
    , contributor
    Comments (490) | Send Message
     
    In its latest quarter, MU grows its revenue 71.8% y/y. If MU refrains from price hike it may attract even more sales whereupon volume leveraging may help reduce cost and improve the margin accordingly. MU may consider raise its price less than 10%; at the level that can optimize the bottom line.
    30 Jun, 09:33 PM Reply Like
  • Jaret Wilson
    , contributor
    Comments (986) | Send Message
     
    Tai Yu, volume isn't really the issue. In DRAM they are selling as much as they can make as fast as they can make it already.
    30 Jun, 10:07 PM Reply Like
  • Tai Yu
    , contributor
    Comments (490) | Send Message
     
    Hi Jaret,
    Apparently MU has a 'problem' of too much demand on their problems. MU can increase its capacity via organic growth or acquisition as in its acquiring of Elpida. I am a layman in the production of DRAM yet I am pretty sure there are better ways to produce if not better chips. I believe the continual quest for improvement set American companies apart from those of other countries.
    Technically, the chart pattern from June 24 to 30 is a classic 'rising three methods', a bullish continuation pattern. DMI shows MU is currently in a strong up trend.
    1 Jul, 07:25 AM Reply Like
  • Jaret Wilson
    , contributor
    Comments (986) | Send Message
     
    Tai Yu, there's no one significiant left to acquire in DRAM (other than buying more of partially owned Inotera, and that's rather expensive and they don't seem inclined to do it.) Having slightly too little supply is great as it is causing prices to skyrocket. That sounds perfect to me, I'm happy to see them not grow when they can then get superior pricing.
    1 Jul, 02:29 PM Reply Like
  • Tai Yu
    , contributor
    Comments (490) | Send Message
     
    Hi Jaret,

     

    I'm sure management at MU has all the information and expertise to conduct a price elasticity analysis. Raising price may subdue demand yet revenue per unit sold will surge and price optimization will end up with the biggest revenue or gross profit. Management does need to take care of the long term relationship with its clients and Samsung's move to raise price ahead of others may strain its relationship with its clients that may help to strengthen that of MU with its customers.

     

    Samsung is a well-run company. I read a recent article in Bloomberg that tells all the chairman children are presidents of its various subsidiaries. I suspect Samsung, like a lot of Asian companies, may suffer from nepotism.

     

    Ford Motor chairman is William Clay Ford and is the grandson of founder Henry Ford. The grandson may be a smart guy himself yet he is able to recognize the best talent in his family may not match the best talent in the universe. Was this the reason that Alan Mulally was hired as CEO back in Sept '06.

     

    The bottom line depends a lot on ASP but the ability to control or even to lower cost is also important. As a retail investor with little knowledge of how the company is run i may have to rely on reading the chart to discern the market sentiment.

     

    The competition landscape may change over a prolong period of time yet between mid Apr '14 and today I believe a window of less than 3 months is not long enough to warrant a huge change to MU's challenges.

     

    The price change since mid Apr '14 may suggest MU's prospect does become a lot rosier in less than 90 days. MU hit an interim low of $21.02 on Apr 11. MU purchased on that day will see a gain of 61.9% today and would see a hefty 138% upside should MU hit the $50 target. Again the fundamental of MU may not have changed that much since mid Apr yet the market sentiment does change drastically.

     

    I believe Investors/traders may discern the following signs of bottoming in mid Apr, such as:

     

    * bullish divergence to RSI. The interim low prior to that on Apr 11 was on Mar 28 at $21.7. Albeit at a lower low on Apr 11, RSI was higher than that on Mar 28.
    * the 3 day candle pattern ending Mar 31 was 'morning star', the 3 day candle ending Apr 14 was another 'kind of morning star'. A cautious investor/trader may accumulate MU on Apr 15 as MU continued to move higher and closed at $22.17 on the day.
    * by Apr 15, %K rose above %D at the oversold zone.
    * by Apr 21. MACD has risen above the zero line when MU gapped up too.

     

    1 Jul, 03:35 PM Reply Like
  • Jaret Wilson
    , contributor
    Comments (986) | Send Message
     
    Tai Yu, it's a recognition of a new memory industry and hence sustained profits. Oligopoly pricing, disciplined capex, sustained bit demand growth, etc. A number of us have written quite a lot of articles on the subject over the past year which may be of help. Regarding cost cutting, that hasn't changed much, cost per bit will continue to decrease year over year by 20%+.
    1 Jul, 07:37 PM Reply Like
  • Tai Yu
    , contributor
    Comments (490) | Send Message
     
    Thanks for your update. I would appreciate your sharing of your expertise knowledge going forward. Let me share with you an old Chinese story explaining why a more comprehensive knowledge of a stock may reduce investment risk.

     

    A group ten children born blind had the chance to encounter an elephant the first time in their life. In order to help them 'see' the huge animal, the teacher in charge dispatched them to feel the animal. Each of these children happened to touch different parts of the body. When they were asked to describe the animal each of them came up with a hugely different picture. Had the children sit down and tried to collate the different observations, the collective picture may resemble pretty close to the real configuration.

     

    I believe in stocks, we need to grasp the different perspectives that include understand the business, ability to crunch the metrics to come up with a fair valuation, understand the competitive landscape, the SWOP etc and last but not the least what the chart is telling us.

     

    Notice how a debate will help us to look at otherwise blind spots and spur us to review our original premise should we be convinced we have made mistakes.

     

    1 Jul, 09:10 PM Reply Like
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