Micron Technology: Given Future Potential, Patience Is A Virtue
Smart Value Investor • 69 Comments
Smart Value Investor • 69 Comments
Wed, Apr. 27, 8:49 PM
- IBM has launched three new all-flash storage arrays: The A9000, the A9000R, and the DS8888. The A9000 targets cloud service providers and mid-sized businesses. It features a scale-out architecture (preferred by many cloud providers) that can support up to 144 nodes, and automatically adjusts when more capacity is added. (press release)
- The A9000R targets enterprises and large service providers. It uses a more traditional rack architecture, and can feature up to 1.8PB (1,800TB) of capacity, 12 controllers, and 8 nodes, with each controller able to connect to each node. Also launched: The DS8888, a flash array meant for mainframes.
- Micron (NASDAQ:MU) is supplying the high-performance flash memory that goes into IBM’s systems, thanks to a multi-year alliance between the firms. Big Blue touts a low minimum latency of 250 microseconds for its systems even with various data services turned on, the inclusion of cloud-friendly features such as multi-tenancy, and a storage cost as low as $1.50/GB thanks to data-reduction features.
- Also: IBM says it plans to launch a flash system in Q3 that’s aimed at big data/analytics workloads (it’s being developed in partnership with SanDisk), and that it will offer a version of the A9000R that can scale out to multiple racks.
- The products stem from a commitment (announced in 2013) to invest $1B in flash R&D. IBM, a top player in the flash array market along with EMC, HP Enterprise, and Pure Storage (NYSE:PSTG), is clearly taking flash storage seriously, as a growing number of enterprise and cloud app workloads migrate to SSDs. However, rivals are as well. EMC’s DSSD unit recently unveiled its first flash array, while listing impressive throughput (IOPS), bandwidth, and latency figures. Around the same time, Pure Storage launched a scale-out system called FlashBlade that promises a cost of less than $1 per usable capacity.
Tue, Apr. 26, 10:29 AM
- Thanks to weak PC DRAM demand and continued DRAM/NAND flash price pressure, Korea's SK Hynix (OTC:HXSCF +6% in Seoul) saw revenue drop 17% Y/Y in Q1 to KRW3.7T ($3.22B), and net income drop to KRW444B from KRW1.3T ($1.1B) a year ago. However, the company also guided for DRAM shipments to rise by a mid-teens % Q/Q (mobile and server demand will lead the way), and NAND shipments to rise more than 30% thanks to new mobile products (iPhone 7?).
- Micron (MU +7.3%) is getting a lift from Hynix's Q2 outlook. Also possibly helping: Hynix mentioned on its earnings call (transcript) 2016 capex is now expected to be below a 2015 level of KRW6.6T ($5.8B). Micron guided in late March for FQ3 (May quarter) revenue of $2.8B-$3.1B, nearly flat Q/Q at the midpoint relative to FQ2's $2.93B.
- Regarding DRAM, Hynix said it's expecting "more positive demand momentum around the second half as inventory levels for major customers is not too high today and demand from new smartphone launch toward the end of the quarter is expected to stimulate mobile DRAM demand with adoption of higher-density DRAM to continue, and launch of new server chipsets is expected to drive system buildup demand for servers" In addition, supplier capex is expected to drop in 2H16. The company plans to grow DRAM bit shipments at a low-to-mid 20% clip in 2016.
- The NAND supply/demand balance "remained more stable than in expected," and the trend is expected to continue in Q2. However, Hynix cautions 3D NAND ramps in 2H16 could affect the balance. Hynix's 2016 NAND bit shipment growth is expected to be in the mid-to-high 30s.
Sun, Apr. 17, 9:27 AM
- Aside from an upgrade by Raymond James on Friday, Brean Capital initiated coverage of Micro (NASDAQ:MU) with a Buy rating and $14/share price target, implying upside of 31%.
- Brean: "On October 20 2015, Intel (NASDAQ:INTC) unexpectedly announced a plan to convert its 100%- owned CPU fab in Dalian, China into a NAND fab by 2H16. Intel expects to spend at least $3.5B over the next 3-5 years and could spend as much as $5.5B to convert this plant. With Samsung already shipping 3D NAND and other manufacturers following suit, we believe investors are concerned about the potential surfeit of NAND supply in the coming years and view a new large supplier negatively. While difficult to predict the timing of such NAND chips coming on line, we look for more discipline in the NAND industry similar to DRAM and believe both companies will work together to maximize profits.
- "It is notable that 3D NAND devices are actually manufactured on older process nodes (35nm-50nm). 3D NAND will allow memory manufacturers to continue to increase capacity at a lower cost/GB than planar NAND. All NAND manufacturers have plans in place to move to 3D NAND, with Samsung being the first followed by all other manufacturers who started in the 2H15. In contrast to all other companies using a charge trap design, MU will continue to use a floating gate design for 3D.
- "The DRAM industry has been under a consolidation wave over the past decade. At this point, the DRAM competitive landscape is much more concentrated, with three providers accounting for more than 90% of the market. While Samsung’s (OTC:SSNLF) behavior over the last year has proven that even under the “new paradigm” in Memory, the industry will still face supply-driven cyclicality. Logically, we believe the overriding consequence of consolidation will result in more disciplined supply growth in order for players to maximize profits, but in this capital-intensive space, we expect supply-driven up and down cycles such as that witnessed in 2013/14 and then 2015/16."
- Now read Micron: Awkward, But There Is Vision »
Fri, Apr. 15, 8:30 AM
Fri, Apr. 15, 1:12 AM
- After previously announcing it plans to sell $1B worth of senior notes due 2023 (and seeing its shares drop 4.4% in regular trading afterwards), Micron (NASDAQ:MU) has upped the offering's size to $1.25B.
- The notes carry a steep interest rate of 7.5%. Micron can redeem them in whole or in part until April 15, 2019 at a price equal to 100% of the principal plus a "make-whole" premium and accrued/unpaid interest. Afterwards, the company can redeem at "specified prices that decline over time, " plus accrued/unpaid interest.
Thu, Apr. 14, 10:04 AM
- Micron (MU -2.8%) is selling $1B worth of senior notes due 2023. Net proceeds will be used for "general corporate purposes, including to fund capital expenditures, working capital, and to pay related fees and expenses."
- Micron had $7.6B in debt and $5.1B in cash/investments as of March 3. The company said in December it would raise $2.5B on debt to help pay for its purchase of the 67% of Taiwanese DRAM maker Inotera it doesn't yet own.
- Shares are lower on a quiet morning for equities, after rallying strongly yesterday amid a market rally. Possibly weighing: Hard drive giant Seagate, which shares many common end-markets with Micron and formed an alliance with the company in early 2015, issued a warning last night and is down 17.2%.
- Now read Micron: Bernstein's 'New Memory Paradigm' Is Dead
Tue, Apr. 12, 2:09 AM
- According to research firm Gartner, global shipments of personal computers fell 9.6% to 64.8M units during Q1, marking the sixth consecutive quarter of declines and the first time since 2007 that shipments dropped below 65M units (IDC reported similar results worldwide).
- In the U.S., PC shipments totaled 13.1M units, representing a 6.6% decline from a year earlier and the lowest volume in three years.
- The sector has faced headwinds in recent quarters which include an economic slowdown in China, the strong U.S. dollar and the growing popularity of smartphones.
- Related stocks: OTC:ASIYF, AMD, HPQ, INTC, OTCPK:LNVGY, MSFT, MU, NVDA, SNE, STX, OTCPK:TOSYY, WDC
Wed, Mar. 30, 4:11 PM
Tue, Mar. 29, 5:35 PM
Fri, Mar. 18, 9:38 AM
- Susquehanna's Mehdi Hosseini: "While we ultimately believe margins are in a bottoming phase (which has been a key aspect of our reluctance to capitulate to Neutral), we believe the confluence of softer DRAM and uncertain NAND trends coming off our Korea/Taiwan trip, along with an untimely debt raise associated with Inotera, has escalated the risks to our long view, and thus has led to our reduction in EPS estimates and downgrade to Neutral."
- Hosseini, whose target has been cut by $5 to $10, adds Korean/Taiwanese checks "suggest a downtick in DRAM industry bit demand and a softening of ASP assumptions," NAND ASP pressure persists (in spite of healthy demand), more debt is needed to Micron's deal with Nanya to take full ownership of the companies' Inotera JV, and that Inotera synergies "remain undefined," with a "die penalty" for mobile and server DRAM chips offsetting cost synergies.
- His FY16 (ends Aug. '16) and FY17 EPS estimates have respectively been cut to $0.11 and $0.48 (consensus is at $0.40 and $1.46). The downgrade comes ahead of Micron's (MU -0.4%) March 30 FQ2 report, and follows a downgrade last week from Nomura (also followed DRAM checks). Nanya President Pei Ing Lee recently said DRAM prices could drop sharply again in 2H16, as new capacity from Samsung, SK Hynix, and Micron arrives.
Mon, Mar. 7, 9:28 AM
- Nomura's Romit Shah, downgrading Micron (NASDAQ:MU) to Neutral and cutting his target by $4 to $8: "Last week, we met with every major DRAM supplier in Taiwan and Korea. The focus is not maximizing profits. It’s market share. DRAM supply is growing and there seems to be no intention to cut production. The implication is lower ASPs, which we don’t believe is factored into expectations for a strong margin recovery in 2H-16." With demand weak across PCs, mobile devices, and servers, he sees ASPs dropping at least 30% in 2016, worse than a consensus for a mid-teens drop.
- Shah expects Micron to continue underperforming until DRAM production is cut. His new target is equal to 10x 2017E EPS or 0.7x book value. "The prevailing view has been that the DRAM industry is structurally positioned to maximize profits; however, we’ve been more negative on Micron over the last twelve months, arguing that Samsung’s widening technology lead would result in share loss, higher capital spending and lower free cash flow."
- MU -3.6% premarket to $11.45. DRAM accounted for 58% of the company's November quarter revenue.
- Last Friday: Wells Fargo turns bullish on chip stocks, upgrades Micron and others
- Last month: Micron receives upbeat commentary following analyst meeting
Fri, Mar. 4, 5:51 PM
- Following a rough 2015 in which weak PC demand, slowing smartphone growth, plunging memory prices, and a late-year inventory correction all weighed, Wells Fargo's David Wong thinks a chip industry recovery is on the way.
- His rating for the sector has been upped to Overweight from Market Weight, and his ratings for Micron (NASDAQ:MU), Analog Devices (NASDAQ:ADI), and Microsemi (NASDAQ:MSCC) in particular have been raised to Outperform. Outperform ratings are reiterated for Intel (NASDAQ:INTC), Qualcomm (NASDAQ:QCOM), Linear (NASDAQ:LLTC), AMD, Xilinx (NASDAQ:XLNX), and SunEdison Semi (NASDAQ:SEMI).
- Wong argues 2016 chip industry growth could be as high as 7%
(with growth reaching double-digits by year's end), and that 8%-14% growth is possible in 2017. Gartner estimates industry revenue fell 1.9% in 2015 to $333.7B.
- Wong: "Over the last 5 years 2010-2015, semiconductor industry growth has tracked below global GDP for the most part. We think this has created significant pent-up demand created by the deferral of electronics goods purchases and aging of the installed base of electronics systems ... We think that there could well be the first signs of improvement in the year/year comparisons at some point in the June 2016 quarter in the many of the broader chip markets, including the industrial, communications infrastructure and PC markets."
- Some expectations for a recovery might already be priced in: The Philadelphia Semi Index (NASDAQ:SOXX) is up 18% from a February low of $74.80. However, it's still down 13% from a June high of $101.80.
- Earlier today, Broadcom (the company produced by the Avago/Broadcom merger) posted big gains after beating January quarter estimates and issuing healthy April quarter guidance. On its earnings call, Broadcom forecast solid April quarter growth for its wired infrastructure (telecom/networking chip) segment, and a 2H16 recovery for its mobile chip segment (recently hurt by soft iPhone-related demand). More cautious outlooks were provided for Broadcom's storage and industrial segments.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Tue, Feb. 16, 10:09 AM
- Believing shares will outperform in 2H16 with the help of the company's 20nm DRAM and 3D NAND ramps, Mizuho's Vijay Rakesh has upgraded Micron (NASDAQ:MU) to Buy following Friday's Winter Analyst Conference, while keeping his target at $12. Shares are rallying on a morning the Nasdaq is up 1.2%.
- Susquehanna's Mehdi Hosseini (Positive rating, $15 target) also provides a favorable reaction, while cautioning near-term headwinds remain. "FY17 is set up for a strong rebound in margins given the acceleration in cost/bit (for both DRAM and NAND) however, near term the stock may see pressure. The commercialization and adoption of 3D XPoint memory is pushed out from 2016 to 2017, with the mobile market (and not enterprise) as the first adopter. To help expedite the cost/bit reduction, MU's FY16 capex will come at the high end of previously guided range of $5.3B-$5.8B, with $0.7B-$0.8B financed by strategic partners."
- He adds Micron trades for only 0.79x book value. "With FY17 setting up for a strong rebound in GM/earnings, he believes there is enough earning power to help the shares trade above the [book value]."
- Last Friday: Cowen, Wells Fargo pleased with Mciron's analyst meeting
Fri, Feb. 12, 6:42 PM
- Beaten-up Micron (MU +3.4%) made it back above $10 today after hosting its Winter Analyst Conference this morning. Cowen and Wells Fargo were among those to provide positive reactions.
- Following major 2015 DRAM price declines, Cowen's Tim Arcuri is pleased with Micron's DRAM outlook. "Forward industry commentary remained constructive on a combination of structural supply constraints and, we think, a more candid desire from Samsung to maintain memory profits now that mobile has imploded."
- Arcuri is worried about NAND oversupply as industry 3D NAND production ramps, but likes the competitiveness of Micron and Intel's 3D NAND offerings. "[P]er our estimates, [48-layer 3D NAND] is ~60-70% more bits/wafer than 1z planar [NAND] – which reeks of an over-shoot and one where we remain very bearish on the supply side ... Relative to MU’s own solution, our field work continues to suggest a very strong offering with a truly unique 3D NAND process and is the “dark horse” in the 3D NAND battle and the one about which Samsung is most concerned."
- Wells' David Wong: "In our view, the key takeaway from the presentations is that Micron’s upcoming DRAM and NAND technology transitions could help drive bit growth over the next two years, after several quarters in which bit growth paused, while also driving down cost per bit and helping Micron’s margins."
- Wong recapped Micron's near-term DRAM/NAND bit growth and cost/bit outlook: "The FY17 vs FY15 expected CAGR for DRAM bit shipments is 20-30%. NAND bit output is expected to continue drifting sideways through much of the rest of FY16, and then ramp steadily with a fairly steep slope through FY17, driven, we think, by ramping 3D NAND output. The FY17 vs FY15 expected CAGR for NAND bit shipments is 30-40% ... The 2 year CAGR, FY17 vs FY15, for average cost per bit is expected to be down 15-25% for DRAM and down 20-30% for NAND."
- In its conference slides (.pdf), Micron forecast DRAM and NAND bit demand will respectively see ~25% and ~40% CAGRs from 2016-2019, with the high-margin server/storage market delivering 40% and 60% CAGRs. PCs are expected to account for less than 20% of DRAM bit demand by 2019.
- On its list of 2016 operating priorities, Micron includes ramping 20nm DRAM and 3D NAND, and commercializing 3D XPoint. The company forecasts 3D NAND will account for over 50% of NAND output by the fall, and is aiming for 27% 3D XPoint penetration for targeted workloads - the list includes data mining and warehousing, virtual desktops, and transaction processing - by 2022.
Mon, Feb. 8, 2:37 PM
- Many tech stocks are seeing 6%+ losses as investors flee to safety yet again. The Nasdaq is down 3.4%, and the S&P 2.7%.
- As was the case on Friday following Tableau and LinkedIn's disappointing guidance, a slew of enterprise tech stocks are seeing big losses, with cloud software and security tech names well-represented on the casualty list.
- Also: Solar stocks are having another brutal day (TAN -6.7%) as energy stocks get routed amid fears Chesapeake Energy is close to bankruptcy. WTI crude oil is once more near $30/barrel.
- Enterprise software decliners: Adobe (ADBE -9.6%), Paylocity (PCTY -19.1%), Salesforce (CRM -9.9%), Workday (WDAY -12%), Guidewire (GWRE -12.5%), ServiceNow (NOW -11.5%), Zendesk (ZEN -13.8%), Paycom (PAYC -13.4%), Marin Software (MRIN -10.3%), Castlight (CSLT -8.4%), Cornerstone OnDemand (CSOD -12.1%), Atlassian (TEAM -13.2%), inContact (SAAS -9.6%), and Bazaarvoice (BV -14.5%).
- Enterprise security decliners: Palo Alto Networks (PANW -12.2%), FireEye (FEYE -9.8%), CyberArk (CYBR -11.5%), Proofpoint (PFPT -12.7%), Qualys (QLYS -8.9%), Imperva (IMPV -9.7%), Rapid7 (RPD -9.4%), and Barracuda (CUDA -8.4%).
- Solar decliners: SunEdison (SUNE -11.3%), SunPower (SPWR -8.8%), JinkoSolar (JKS -7.6%), SolarEdge (SEDG -7.9%), Yingli (YGE -7.1%), TerraForm Power (TERP -10.7%), and TerraForm Global (GLBL -9.2%).
- Other major decliners: Micron (MU -9.1%), Western Digital (WDC -10.5%), Arista (ANET -10.9%), Universal Display (OLED -10.6%), Rackspace (RAX -11.3%), Fitbit (FIT -8.7%), Nimble Storage (NMBL -11.3%), Sierra Wireless (SWIR -9.9%), Rocket Fuel (FUEL -9.8%), Knowles (KN -9%), Mitel (MITL -8.9%), and Alarm.com (ALRM -8.9%).
- Previously covered: Yelp, Cognizant, Tableau, Globant, Ambarella, European tech stocks
Mon, Feb. 1, 8:15 AM
- Citing a low valuation following a massive selloff, Goldman's Mark Delaney has upgraded Micron (NASDAQ:MU) to Neutral, albeit while cutting its price target by $2 to $11.
- Delaney argues an estimated tangible book value of $11 provides downside support, and believes DRAM supplies are stabilizing. Micron is 12 days removed from making a new multi-year low of $9.31.
- Shares are up fractionally premarket; Nasdaq futures are down 0.6%. Micron rose 11.6% on Friday amid big gains for tech stocks in general, and Apple suppliers in particular.
- Two weeks ago: Morgan Stanley calls Micron's valuation historically low
Micron Technology, Inc. provides semiconductor solutions. It manufactures and distributes semiconductor solutions. It manufactures and markets DRAM, NAND Flash and NOR Flash memory, as well as other memory technologies, packaging solutions and semiconductor systems for use in computing,... More
Industry: Semiconductor - Memory Chips
Country: United States
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