Micron Technology: Given Future Potential, Patience Is A Virtue
Smart Value Investor • 69 Comments
Smart Value Investor • 69 Comments
Fri, Jan. 29, 3:27 PM
- Several Apple suppliers are seeing major gains after iPhone power amplifier supplier Skyworks (SWKS +5.5%) and iPhone LCD driver IC supplier Synaptics (SYNA +10.6%) delivered their calendar Q4 reports yesterday afternoon - Skyworks beat estimates, while Synaptics (initially lower) missed on sales and beat on EPS.
- Both companies provided soft Q1 guidance (I, II) - Synaptics also suggested it's seeing weakness at multiple top smartphone OEMs . But with nearly every other iPhone supplier to have reported (not to mention Apple itself) having also guided light, shares are rallying nonetheless.
- Big gainers include mobile DRAM supplier Micron (MU +11.1%), microphone supplier Knowles (KN +11.2%), motion sensor supplier InvenSense (INVN +7.5%), audio codec chip supplier Cirrus Logic (CRUS +6.6%), NFC chip/motion co-processor supplier NXP (NXPI +5.9%), and RF chip suppliers/Skyworks rivals Qorvo (QRVO +6.8%) and Avago (AVGO +5.6%). The Nasdaq is up 1.8%.
- Micron could also be getting a lift from the market-pleasing reports delivered by hard drive giants Seagate and Western Digital, given Micron is exposed to many of the same end-markets as Seagate/Western.
Cirrus Logic is adding to the big Thursday gains seen after the company provided encouraging FY17 comments in its FQ3 earnings call. InvenSense has more than recovered the Thursday losses seen after the company provided soft FQ4 guidance and suggested it had lost share at Samsung.
- Possibly helping Synaptics out: When asked about M&A reports on the earnings call, CEO Rick Bergman didn't quite shoot them down. "[W]e're not going to comment on rumors or market speculation ... at the end of the day it is our job to maximize shareholder value so we'll listen to any great ideas that can do that and evaluate them appropriately."
Meanwhile, Bergman asserted Synaptics' TDDI (integrated touch controller/display driver) sales are due to ramp strongly thanks to numerous design wins at top LCD panel makers, and that its ClearForce pressure-response tech will be "a significant differentiator" for Synaptics' TDDI offerings.
Thu, Jan. 21, 4:17 PM
- Chip stocks fared well (SOXX +1.5%) on a day the Nasdaq was nearly flat. The gains came after FPGA maker Xilinx (XLNX +8.6%) beat calendar Q4 sales estimates, issued solid Q1 guidance, and published an 8-K filing that has fueled hopes the company will join the ranks of chip firms to be acquired during the industry's M&A wave.
- Also: Microcontroller and SRAM/NOR flash memory maker Cypress Semi (CY +7.6%) affirmed its Q4 guidance against a backdrop of low expectations.
- Seeing the biggest gains was AMD (AMD +16.1%), which is two days removed from providing weak Q1 guidance to go with a Q4 sales beat. In spite of the guidance and the largely downbeat analyst commentary that has followed, AMD is now up 7% since the Q4 report arrived. Short-covering is likely helping - 120.4M shares (19% of the float) were shorted as of Dec. 31.
- Small-cap Xilinx rival Lattice Semi (LSCC +10.8%) was also a standout. Lattice (like Xilinx) has seen its share of M&A speculation, and CEO Darin Billerbeck has suggested he's open to a sale.
- Other notable gainers include Cavium (CAVM +3.6%), Silicon Motion (SIMO +3.7%), and Knowles (KN +6.5%) - Cavium is exposed to some of the same end-markets as Xilinx. MagnaChip (MX +13.9%) jumped two days after making a positive Q4 pre-announcement. Beaten-down Micron (MU +8%) also rallied strongly, possibly aided by a bullish Morgan Stanley note.
- On its earnings call (transcript), Xilinx mentioned the automotive market (a strong point for many chip companies, as chip content within cars steadily grows) is expected to see record sales in calendar Q1, and deliver 30% sales growth for FY16 (ends in March). Mobile infrastructure-related sales are expected to rise Q/Q, but deemed unlikely to reach a March 2014 peak anytime soon. CEO Moshe Gavrielov: "[E]verything until 2020 is likely to be of a smaller scale and the next big surge will be driven by 5G."
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Thu, Jan. 21, 2:06 PM
- Morgan Stanley's Joseph Moore (Overweight rating, $18 target) believes Micron's (NASDAQ:MU) valuation is approaching the levels seen at its 2012 bottom on a price/book, EV/sales, trailing P/E, and replacement value basis. He sees the stock having downside protection as long as Micron can manage balance sheet risks.
- Moore still thinks Micron's fundamentals will remain weak in 1H16, but considers a 2H16 recovery possible. "We think that recent spot market stability in DRAM shows that there isn't panic in the market, but we do expect further weakness to evolve short term." He also predicts Micron's cost structure will improve significantly in the coming months.
- Like many other former tech high-flyers, Micron has been clobbered in the first weeks of 2016 - shares were hit last week following Intel's earnings, and made an intraday low of $9.31 yesterday before bouncing. And like a slew of other beaten-up names, Micron is rallying today on healthy volume (35.8M shares vs. a 3-month daily average of 23.8M).
- Last month: Micron slumps after earnings/guidance; Street looks to 2016
Wed, Jan. 20, 11:47 AM
- Tech large-caps aren't being spared as the Nasdaq drops 2.6%, and the S&P 2.7%, in the market's latest plunge. A slew of companies with $10B+ market caps are seeing declines that on many recent days were largely reserved for smaller ex-momentum plays.
- The casualty list includes Alibaba (BABA -5.3%), and that of course means Yahoo (YHOO -6%) is along for the ride. Top Alibaba rival JD.com (JD -6.2%) is also down strongly; Chinese macro fears continue to run high.
- Facebook (FB -4.9%), which (unlike most peers) remains well above where it traded 12 months ago, has fallen towards $90. Q4 results arrive on Jan. 27.
- Cisco (CSCO -5.2%) has fallen below $23. Possibly weighing: Piper's Troy Jensen has reported weak Q4 networking reseller survey results, and predicts Cisco will issue light FQ3 (April quarter) guidance next month with its FQ2 report. His FQ3 sales estimate has been cut by $400M to $11.9B (below a $12.07B consensus).
- DRAM/NAND flash maker Micron (MU -10.3%) is among the biggest decliners, with shares falling into the single digits. Micron now trades for 6.6x an FY17 (ends Aug. '17) EPS consensus of $1.48. Online payments leader PayPal (PYPL -4.4%) is having a rough day as well.
- IBM (IBM -4.7%), meanwhile, has made new multi-year lows after providing soft 2016 EPS guidance to go with a slight Q4 beat. Netflix (NFLX -6%) has sold off in spite of reporting strong Q4 subscriber adds.
Fri, Jan. 15, 12:35 PM
- On a day the Nasdaq is off 4.1%, companies with strong PC exposure are seeing even bigger losses after Intel (down 9.2%) beat Q4 estimates and provided healthy 2016 sales guidance, but also reported a slowdown in server CPU sales growth and offered cautious earnings call remarks about Chinese demand and macro trends.
- Intel's Client Computing Group (provides PC/mobile CPUs) only saw a 1% Y/Y revenue drop in Q4 in the face of weak PC demand. However, volumes were down 16%, with desktop, notebook, and tablet CPU volumes respectively falling 9%, 10%, and 33%. A 17% increase in ASPs minimized Intel's revenue drop. Earlier this week, IDC and Gartner respectively estimated PC shipments fell 10.6% and 8.3% Y/Y in Q4.
- The list of PC-related names seeing big losses includes Microsoft (MSFT -4.8%), Nvidia (NVDA -6.7%), AMD (AMD -8.1%), HP Inc. (HPQ -5.2%), Micron (MU -8.9%), Seagate (STX -6.4%), and Western Digital (WDC -6.4%). AMD reports on Jan. 19, Microsoft and Western on Jan. 28, and Seagate on Jan. 29.
- In other Microsoft news, the company has carried out price cuts of up to 17% for Azure cloud computing services, following new price cuts from Amazon, and is reportedly looking to acquire Indian mobile ad network owner InMobi. Google was rumored to be in buyout talks with InMobi last year.
- AMD, meanwhile, has begun shipping its Opteron A1100 (Seattle) ARM server CPU. Seattle, first announced in 2013, sports up to eight 64-bit ARM Cortex A-57 CPU cores, and enters a market also targeted by AppliedMicro, Cavium, and Qualcomm.
Tue, Jan. 12, 5:56 PM
- IDC estimates global PC shipments fell 10.6% Y/Y in Q4 to 71.9M, just a slightly smaller drop than Q3's 10.8%. Gartner is once more a little less downbeat, estimating shipments fell 8.3% to 75.7M.
- For the whole of 2015, IDC estimates shipments fell 10.4% to 276.2M. The firm notes adding detachable tablets to its count would respectively provide ~6% and ~3% boosts to Q4 and 2015 growth rates.
- The Q4 figures suggest Windows 10 (available as a free upgrade to Windows 7/8 users) and Intel's (NASDAQ:INTC) Skylake CPU launch provided only a modest sales lift. IDC: "The PC market continued to face persistent challenges [in 2015] from longer-PC lifecycles and competition from mobile phones and tablets, despite the slowing growth in those markets. However, economic issues like falling commodity prices and weak international currencies, as well as social disruptions in EMEA and Asia/Pacific that disrupted foreign markets were a larger factor for 2015."
- IDC VP Loren Loverde still thinks PC replacement rates will pick up in 2016. "Commercial adoption of Windows 10 (NASDAQ:MSFT) is expected to accelerate, and consumer buying should also stabilize by the second half of the year. Most PC users have delayed an upgrade, but can only maintain this for so long before facing security and performance issues." Counting detachable tablets, IDC expects 1%-2% 2016 growth. Gartner forecasts a 1% decline.
- Lenovo (OTCPK:LNVGY) remained the PC market's top player: IDC estimates Lenovo's shipment share rose 140 bps Y/Y in Q4 to 21.4%. #2 HP's (NYSE:HPQ) share rose 10 bps to 19.9%. #3 Dell's rose 70 bps to 14.1%.
- Apple (NASDAQ:AAPL) and Asus (OTC:AKCPF) were tied at #4 with 7.9% shares - Apple's share rose 110 bps, and Asus' 90 bps. Apple's revenue share could be closer to 15%. Non-top 5 vendors, hurt by their relative lack of scale, collectively saw their shipment share drop 420 bps to 28.7%
- Related tickers: NVDA, AMD, MU, STX, WDC
Mon, Jan. 11, 12:57 PM
- Investors continue throwing in the towel on former tech high-flyers: Micron (MU -6.3%), GoPro (GPRO -4.4%), Fitbit (FIT -12.3%), 3D Systems (DDD -3.7%), Rackspace (RAX -6.7%), and Etsy (ETSY -8.8%) have each fallen to new 52-week lows on a day the Nasdaq is down 0.6%.
- FireEye, which received cautious notes from Wedbush and Piper, is also selling off. As is ExOne (XONE -11.6%). Margin calls and/or fund liquidations could be contributing to the rout.
- Etsy's losses come amid a lockup expiration. Possibly weighing on Rackspace: A Piper CIO survey indicating Amazon Web Services and Microsoft Azure continue gaining cloud infrastructure (IaaS) mindshare; the firm sees AWS/Azure having a duopoly, with Google, Rackspace, and IBM trailing.
- Fitbit is now down 35% since Jan. 5, when the company's Blaze smartwatch was unveiled at CES. Shares go for 17x a 2016 EPS consensus of $1.13. GoPro and Micron now respectively trade for 14x and 8x their 2016 and FY17 (ends Aug. '17) consensus EPS estimates.
- Update: Likely weighing on ExOne: The company has struck deals for at-the-market stock offerings worth up to $50M.
Fri, Jan. 1, 4:53 AM
- Dow: NKE +29%; HD +27%; MCD +25%; GE +21%; V +16%.
- S&P 500: NFLX +135%; AMZN +119%; ATVI +90%; NVDA +61%; CVC +54%.
- Nasdaq: NFLX +135%; AMZN +119%; CTRP +104%; ATVI +90%; NVDA +61%.
- Dow: WMT -29%; CAT -28%; AXP -26%; CVX -21%; UTX -18%.
- S&P 500: CHK -77%; CNX -77%; SWN -75%; FCX -71%; FOSL -67%.
- Nasdaq: MU -59%; WDC -47%; STX -47%; VIAB -46%; BBBY -37%.
Dec. 29, 2015, 4:04 PM
- CFO Ernie Maddock has disclosed he bought 10K Micron (MU +1.1%) shares on Christmas Eve at $14.32, raising his total stake to 113,256. Maddock previously bought 5K shares in July at $17.50.
- The latest purchase came a day after Micron sold off in the wake of mixed FQ1 results and light FQ2 guidance. The DRAM/NAND maker is down 59% on the year, and goes for 9.6x an FY17 (ends Aug. '17) EPS consensus of $1.49. FY15 EPS totaled $2.69.
Dec. 23, 2015, 10:56 AM
- Raymond James' Hans Mosesmann has downgraded Micron (MU -4%) to Outperform from Strong Buy after the DRAM/NAND giant missed FQ1 revenue estimates, slightly beat EPS estimates, and offered below-consensus FQ2 guidance. A slew of other firms (perhaps reacting as much to Micron's 2015 performance as its numbers) have cut their targets.
- Mosesmann: "Near-term conditions now seem more broadly weaker (i.e. not just PC DRAM segments). Hence, while memory cycles are longer in duration and exhibiting more muted peaks to troughs, we were wrong in expecting Micron’s specific bottoming process to play out in early 2016."
- He's still upbeat about Micron's "structural advantages in 3D NAND and 3D XPoint," as well as the 20nm DRAM ramp and the Inotera deal, but sees them as 2H16 and 2017 catalysts. "We believe valuation, the new, emerging oligopolistic structure in the memory industry, and continued fertile M&A environment all support a solid case to recommend shares off depressed levels for mid- to longer-term investors." Micron's book value (~$12/share) is seen as a possible floor.
- Those staying bullish often argue 2016 DRAM capex cuts will help stabilize the industry. Summit Research's Srini Sundarajan: "Considering that DRAM capex will be materially down (as mentioned in Lam Research conference call, thanks to Samsung’s pruning of DRAM capex; in fact, Micron suggested 25% down DRAM capex next year) in C2016, we grudgingly leave the BUY rating unchanged."
- Cowen's Tim Arcuri (Outperform) notes Samsung is pulling back on DRAM capex, and argues Micron is about to enter a cyclical period where cost headwinds become tailwinds. He also thinks FQ2 EPS guidance would've been positive if note for an expected Q/Q increase in DRAM costs. (source: Notable Calls).
- Needham's Rajvindra Gill (Hold) recommends waiting to buy. "Our checks in Asia indicated ongoing PC weakness, pressure in eMCP and client SSDs that was crystallized on MU’s earnings call. Thus we cut our estimates significantly to $1.30 in FY17 ... We do, however, believe MU’s model has room for leverage if demand stabilizes, and if its technology can catch its peers. We could become more constructive in the $10-11 range and once we have determined that pricing has stabilized."
- On its earnings call (transcript), Micron forecast 2016 industry DRAM bit supply will see low-20% growth in 2016, and industry NAND bit supply mid-30% growth. Mobile made up a low-30% portion of FQ1 DRAM revenue, PCs a mid-20s percentage, servers high-teens, and other products low-20s. Consumer products (memory cards, USB drives, etc.) made up 50% of NAND revenue, mobile a high-teens percentage, SSDs mid-teens, and other products mid-teens.
- Prior Micron coverage
Dec. 23, 2015, 9:12 AM
Dec. 22, 2015, 5:39 PM
Dec. 22, 2015, 4:12 PM
- In addition to missing FQ1 revenue estimates (while slightly beating on EPS), Micron (NASDAQ:MU) has guided in its earnings slides (.pdf) for FQ2 revenue of $2.9B-$3.2B and EPS of -$0.05 to -$0.12, below a consensus of $3.46B and $0.22. Gross margin is expected to drop to 17%-20% from FQ1's 25%.
- FQ1 DRAM/NAND performance: DRAM bit shipments +2% Q/Q, ASP -13%, cost/bit -10%. Non-volatile memory bits (mostly NAND) +5%, ASP -7%, cost/bit -6%. DRAM was 58% of revenue, non-volatile memory 34%, and other products 8%.
Segment performance: Compute Networking Business Unit sales -12% Y/Y to $1.14B, with a 1.8% op. margin. Storage Business Unit +4% to $884M, with a -3.1% op. margin. Mobile Business Unit -13% to $834M, with a 16.3% op. margin. Embedded Business Unit +1% to $479M, with a 23.8% op. margin.
Strong in FQ1: Enterprise DDR4 sales (servers), automotive products, consumer/connected home products. Weak in FQ1: PC DRAM, networking products.
- Financials: Gross margin fell to 25% from FQ4's 27% and the year-ago period's 36%. GAAP SG&A spend -7% Y/Y to $179M, R&D +12% to $421M. Ahead of the Inotera deal, Micron ended FQ1 with $5.4B in cash, and $7.3B in debt.
- Outlook: Micron notes PC DRAM sales remain pressured, while adding "there are signs of demand stabilizing." Client SSD and eMCP (mobile/embedded flash) prices have been hurt by "increased competition" (from Samsung?). Micron expects its 2016 DRAM bit growth to be above-market, and trade NAND bit growth to be below-market. Significantly above-market NAND growth is expected in FY17 (ends Aug. '17) thanks to Singapore's Fab 10X and a 3D NAND ramp. 3D NAND products will be available in the second half of FY16.
- Shares have dropped to $14.15 after hours.
- Micron's FQ1 results, earnings release
- Update (4:34PM ET): Micron is now down 4.4% after hours. The post has been updated to include details about Micron's FQ1 results and 2016/2017 outlook.
Dec. 22, 2015, 4:07 PM
- Micron Technology (NASDAQ:MU): FQ1 EPS of $0.24 beats by $0.01.
- Revenue of $3.35B (-26.7% Y/Y) misses by $110M.
- Shares -4%.
Dec. 21, 2015, 5:35 PM
Dec. 15, 2015, 2:57 PM
- Down 2.7% yesterday following news the company is buying the 67% of Taiwanese DRAM maker Inotera it doesn't yet own for $4B ($3.2B net of Inotera's cash and debt), Micron (NASDAQ:MU) has more than recovered its losses today amid a market rally and a slew of positive analyst reactions.
- Like others on the sell-side, UBS' Stephen Chin argues integrating Inotera, whose DRAM output Micron already fully purchases, will yield manufacturing and cost synergies. "[T]he acquisition should be immediately accretive and enhance DRAM margins further by doing away with the foundry fee/premium (we estimate Micron gross margin could improve 300bps) and simplifies Micron’s margin profile..." He does caution Inotera's 20nm DRAM ramp (set to be finished by mid-2016) "has yet to achieve mature yields and volumes as the sweet spot of 20nm cost reductions are still several months away."
- In the wake of Tsinghua Unigroup's rejected bid for Micron, Credit Suisse's John Pitzer thinks China could be involved in financing either the debt or equity portion of the deal - Micron is paying for Inotera via $2.5B in debt, up to $1B in equity to be issued to Inotera JV partner Nanya, and cash on hand. He estimates Inotera will produce 2016 free cash flow of ~$400M.
- Cowen's Tim Arcuri, however, notes his firm's model (uses Inotera Street estimates) implies only a 2% 2017 EPS benefit to the deal after factoring equity dilution and interest payments. Mizuho's Vijay Rakesh, who has cut his Micron estimates due to DRAM pricing concerns, sees a $0.24 FY17 EPS benefit.
- Deutsche's Sidney Ho is "slightly puzzled" by the move given the benefits Micron received from its existing arrangement with Inotera. "Perhaps given the strategic importance of Inotera, who currently supplies 35% of MU’s DRAM production, MU believes it needs to have better control of Inotera’s technology migration and manufacturing process."
- Micron's FQ1 report arrives on the afternoon of Dec. 22.
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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