Conventional Wisdom, Run-Away Algos, And Teamwork - The Market Vs. Micron

Summary

• Micron's fundamentals are solid and the stock is oversold.
• The market's fears about the effects of a NAND oversupply are unfounded.
• Micron's future success depends very little on NAND.

"The question is, "what will the market pay for a share of Micron that earns $5?" A P/E of 10 would take it to $50 or more. Eventually. I say eventually because it has been my experience that many analysts and institutional investors are dumbfounded by these big moves and don't catch on for a while. When they do catch on, they could "bubble" it up to $100/share.

So, this is the "Single Best Idea" that I have for the next two years, and "if you could only buy one stock," make it Micron."

- Seeking Alpha, "Micron: If You Can Buy Only 1 Stock, Make It Micron", June 10, 2013, Russ Fischer

"One man alone can be pretty dumb sometimes, but for real bona fide stupidity, there ain't nothin' can beat teamwork."

- Edward Abbey

I have been writing about Micron (NASDAQ:MU) for five years now, ever since Russ Fischer made his famous call. I remember being fascinated by his strategic vision. His analysis of the downstream effects of Micron's acquisition of Elpida was persuasive - his arguments compelling and actionable. You didn't have to be a technology guru to understand it. Boiled down, he presented an opportunity to buy cheap shares ($5 and change) in a company that had just acquired (for pennies on the dollar) the 4th largest memory manufacturer. And not just any memory maker, but a company which had just scored a multi-hundred-million-dollar contract with Apple (AAPL). So short-term it was golden and in the longer term - well the thing we needed to remember was that four minus one equals three - just three large DRAM makers were left.

Hmmm… Where have I seen this plot before? Industry consolidation to a few players from many which leads to new found capacity discipline, which leads to pricing power, and from there to rising revenues and profits. There's a word - what's that word - oh yes - it's called oligopoly. PC-DRAM might be a commodity but still, it's vital and if only three suppliers have oligopolistic control of 93% of the world's supply? Well now - we've got an entirely different ball game, don't we?

And the really delicious thing about it was that the big named industry analysts were missing it. Readers of Seeking Alpha were, thanks to Russ, getting a rare chance to get in early on as close to a sure thing as the market can offer. Play ball! And so it began. And here we are today, and even with the latest series of stupid algo tricks, MU is 10X up from where Micron was back then. Not bad, wouldn't you agree? But it hasn't been one smooth climb, has it? Things haven't turned out exactly as Russ expected. We never did get that "bubble" and it is that issue that I want to talk about now, because it is still affecting the stock.

And when I say "still affecting", I offer as exhibit "A" the sell-off in Micron after their stellar Q2, FY '18 earnings report. Now to be clear this sell-off was caused by a confluence of factors - among them trade-war fears, on-going political turmoil, tech sector sell-offs in the wake of the Facebook (FB) revelations, legislative gridlock, interest rate fears, and possibly some good old fashioned profit taking - but I believe the principle factor was the continuing talk of a NAND glut - by Chris Danley of Citi among others - that was amped up by algo-driven selling which fed on the generally negative sentiment of the week. It didn't help that a first-blush reading of Micron's Q2 earnings call seemed to support Danley's concern. The company reported that QoQ NAND ASP's dropped in the "mid-teens" and followed that up with an announcement of more clean-room space in Singapore in the FY '19, 20 period. The fact that this fab build out would not add to overall NAND wafer capacity and that the large drop in NAND ASP was caused by a one-time factor - a large sale in Q1 of higher-priced MLC, which skewed the Q2 comparison - did not seem to register.

Oh well, another day, another unfathomable market selling spasm. Unfortunately, the sad truth of the matter is that we are still dealing with the long-tailed overhang of memory market conventional wisdom that memory makers will inevitably over build, which in turn leads to the hair-trigger (over) reaction of many investors.

We all know how we got to his ugly number 5-handle on the PE, right? All together now - let's hear it for the "C" words - "commodity". And there's another one - "cyclic". The dominant Micron narrative is that no matter how good today is everything goes to hell tomorrow. Either the industry over produces, or demand falls off unexpectedly, and supply now exceeds demand, thereby producing adverse revenue and profit results for industry participants. All industry participants have been affected by this - Micron possibly most of all. The challenge for the industry as a whole and for Micron in particular is to change this narrative regarding their ability to reliably generate increasing revenues and profit.

Fact is, the narrative already has changed on the supply side. Particularly in DRAM, the three remaining suppliers have all made it clear that they have no interest in overbuilding DRAM capacity. But what about demand? Nothing can have changed there, right? No matter how well the industry's suppliers have managed capacity, there's always the chance that global economic conditions will weaken unexpectedly, thereby creating an oversupply situation in DRAM. But that's no less true of Boeing, Microsoft, or any other global company - they can all be overwhelmed in extremis and they're not dealing with a forward PE below 5.

And NAND is definitely more challenging - with five suppliers now that Micron and Intel have formally split there is a much more complex supply environment and thus many more opportunities for miscalculation in building capacity. I have argued that there is immense latent demand for NAND that is emerging as IoT is built out, data centers migrate to the cloud, and pc builders adopt SSD technology, but I will concede that any number of factors could potentially knock down demand below the 45% capacity increase the industry is building in 2019 or 2020. (Note - I do not expect that to happen.)

So is that "C" narrative intact? As much as I hate to say it, a clear-eyed response to that question must conclude that the answer is: not as much as the market thinks but there remains a legitimate question regarding the industry's ability to manage the NAND demand/supply balance, especially when the industry can produce 40% + production gains in NAND just by virtue of technology node advances. This is a problem that we don't have with DRAM. Node productivity has slowed considerably and there is little evidence that the 20% bit density increases we are seeing with the "1X" generation will get any better with "1Y".

So the problem is NAND demand and the real issue is - does it matter? And the answer, as you might suspect, is a mixed bag. It does matter for the industry overall and it especially matters for Intel (INTC) and Toshiba (OTCPK:TOSYY) and Western Digital (WDC), who make only NAND. (And yes, I am ignoring XP sales for calendar year '18 at any rate.) But does it really matter for Micron? My argument is no. Investors would do well to focus on the story the following chart tells: (data from Micron's Q2 FY '18 10Q)

So right off the top we have $4 out of every $5 of profits coming from DRAM but that number understates the full story. Depending on how big you assume Micron's MCP business is and what average content you assume is sold in the MCP packages - MCP's contain both DRAM and NAND - Micron's Q2, FY '18 profits were 85% to 90% from DRAM. Going forward, you wouldn't go far wrong if you used as a rule of thumb that $9 out of every $10 of Micron's profits come from DRAM.

Ok now, work with me on this. I say Micron, you say DRAM! I say DRAM, you say Micron! Micron - DRAM, DRAM - Micron. Go! Team! But I digress… Where were we? Oh yes, we were talking about NAND, and the question is does it matter to Micron? For FY '18, with the latest forecast for DRAM ASP growth this year at 36%, that answer would be - not a lot. Don't get me wrong, NAND revenue and profit growth this year would be nice, but that's all it would be - a metaphorical cherry on top of a really big chocolate sundae.

So let's put some numbers around this and work three scenarios for full fiscal year revenues and earnings. All three scenarios will assume that Micron DRAM bits grow at 20% and DRAM ASP's grow at 36%. Scenario 1 will further assume that NAND bits grow at 50% (mirroring Micron's statement that they would outgrow the industry and the industry would grow at 45%) and that the quarterly-weighted ASP drops -21%. Scenario 2 assumes the same DRAM data but changes the NAND ASP YoY drop to -30%. Scenario 3, the real nuclear winter scenario, assumes DRAM stays the same and NAND ASP's drop 32% YoY (to just above Micron's cost). Please note that the NAND GM% number is as of Q4, 2018. Please also note that the Q4 over Q4 percentages are forecasted prices as of the end of Q4 compared to the same time last year. The year over year numbers are the average prices of the four quarters.

Here's FY '18:

See the pattern here? A 36% DRAM ASP hike on the year for Micron means that even if the bottom falls out of the NAND market (as in scenario 3), Micron still makes an unprecedented amount of money this FY. Will we get to 36% DRAM ASP? Maybe not, but even if DRAM pricing is flat through the end of the year the company has an excellent chance of earning $11 this year. Not bad for a $50 stock.

So let's follow the scenario road as it winds through fiscal 2019. The first two scenarios will assume DRAM prices stay absolutely flat during 2019. Scenario 3, however, is more pessimistic with DRAM ASP's dropping 21% Q4 over Q4 and 6% on a yearly averaged basis. DRAM bits grow another 20% and NAND bits come down a little to 45% growth. The three NAND scenarios basically paint a picture of a bad NAND business in Scenario 1 to a horrific collapse in Scenario 3. Here's how it lays out:

And here's how the big picture looks in terms of revenue and profit growth for Micron:

Let's wrap up. If DRAM prices hold up this year and stay flat next year the Micron NAND business can run at -30% gross margins and the company will still make $10/share in each of the next two years. We could do a similar analysis for the other two DRAM makers - Samsung (OTCPK:SSNLF) and SK Hynix (OTC:HXSCF), and we'd find a similar profit equation. Except for one thing - they both make a lot more DRAM than Micron, so they are even more leveraged by high DRAM prices. Sanjay Mehrotra of Micron has already stated unambiguously that Micron's DRAM build out in 2019 is intended only to maintain their current wafer capacity. Given that signal, and the expense and difficulty of scaling DRAM, what reason is there for either Samsung or SK Hynix to put their enormous DRAM profits at risk?

One last question. Can NAND get as bad as we have painted it in the above scenarios? The answer to that is no unless we assume that IoT and edge computing are a total fail over the next two years. On a tactical level, with 30% + cost decreases this year and next Micron's costs are getting close to the industry's best (at Samsung) and they can weather lower costs much better than at least half the industry's suppliers, including Toshiba, Western Digital, and SK Hynix. On a strategic level, NAND only players Intel, Western, and Toshiba have a compelling incentive to moderate capacity increases if an oversupply situation starts to develop. Finally, and probably most importantly, the price drops in NAND presented in these three scenarios are so large that demand will be stimulated to much higher levels than currently projected. But the real point is that we could spend a lot of time and words discussing this issue of NAND demand and, for Micron at any rate, it really doesn't mean much.

We started this article saying that Micron and the memory industry as a whole need a new narrative to replace the old "commodity" supplier meme. We're not fully there yet for the industry - particularly those companies tied to NAND - but for Micron, we've got a start on it. The new narrative starts with DRAM and we'll add new memories to it in the next article but for now let's keep it simple. I say Micron, you say - yeah - DRAM!

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I am/we are long MU, WDC, NVDA, PSTG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[copacetic99]

I just read on CaringBridge that Russ Fischer passed away last night. This was the post (I deleted the personal phone number at the end, I don't think I should post it in the wider Internet world):

A Fighter Until the End

Journal entry by Julia Fischer-Roaldson — 3 hours ago
It is with the heaviest heart that I share with you that my dad passed away just after 1am this morning after an almost 3 week hospital stay.

He was admitted to St. Mary’s Hospital at Mayo on June 6th fighting Pneumonia and hypertension, then eventually a bowel distension and atrial fibrillation.

He was definitely a fighter over the last two and a half years but on Saturday he made the decision that he’d had enough and opted to discontinue medical interventions. He was very comfortable and surrounded by family when the time came.

Thank you to everyone who supported and loved my dad. He truly was an amazing man and it was a heartbreaking situation the last few years. He’s now finally at peace and we take comfort in that. I also want say thank you to the nurses, NP’s, and doctors that took wonderful care of my dad not only during this hospital stay but all the trips he made since 2016. They are simply angels.

I will post memorial details once we have them figured out. In the meantime, if you have any good stories or memories of my dad please share them with me. My email is [e-mail] or give me a call at ****.

Love,

Julia, Cheri, and Jon

[William Tidwell]

Thanks. I have missed his wit and wisdom on our board. I am in his debt and I know I am not alone in my feelings.

[William Tidwell]

l3,

Sounds reasonable to me, though I wonder how much pioneering Intel is going to do given the delays that Intel has acknowledged. They still haven't made a clear declaration as to how soon in CY '19 they will have the NVDIMM product. Assuming Micron actually releases a product in Q4... So many mysteries...

[flintstone277]

WT, could the opaque stance on XP have anything to do with just milking the DRAM profits and holding their "ace in the hole" back for the time being, plus the longer they keep XP under wraps helps with the legal issues from the ECD situation? I still believe that the "New Memory" is a totally different type of product that will change the map on products that can not only replace DRAM but will be extremely profitable, but is being kept back so MU can milk the vast profits available from DRAM. Either way, I am LONNNNNG MU and very happy to be holding my little bundle of shares.

[khanjar24]

Well also Flintstone, INTC server DIMM support projects and increased penetration of 7000 series and 8000 series intel chips are essential to establishing a market for demand for 3D XP(PC and server side), on top of process improvements as they likely stack 2 or 4 layers of it(I think they're at one layer now, right?) and improve process for better yields, initial whispers on yield 2+ years ago was it was amazingly bad, and this is a completely different type of semiconductor technology. I think 2 months ago one of the vendors showed a product for 2019 with the INTC server chip support that would support 512GB DIMM slot 3D XP, and it was 4 of them per server, and I just know tons of cloud capacity will benefit from that, lower cost than DRAM(and higher capacity and lower TDP) but orders of magnitude faster than NAND technology.
http://bit.ly/2wD9rPl

I consider myself on the whale side of personal computing, I spend between 500 and 1k/year on HDD's, video cards, and computer upgrades, but even I upgraded only to a 6800 series chip so 3D XP is useless to me(and the benefit of the Optane SSD is not for my non-existant workloads), but I would have loved to be able to get the Optane M.2 32GB or 64GB cache product.

[William Tidwell]

flintstone,

Possibly. Sanjay is clearly focusing the company on what they can deliver profitably. Clearly he doesn't think XP is ready - he's going to let Intel take the pioneering arrows.

[linklinklink]

@William

While Micron has been brilliant in their execution of memory and storage, Intel has always been brilliant at integrating new technologies into their products.

I'm going to jump back quite a few years here, but Intel implemented their SSD Caching (Intel RST) way back on their Z86 motherboards in 2011. I know because I'm still running Z86 with an overclocked 2500k @ 4.5Ghz 7 years later. There's been no reason for me to upgrade even while running a 4K GTX 1070 setup.

While affordable mass storage plug and play SSD's are available today, back in 2011 the idea of buying a relatively cheap 32GB SSD and getting 90% of the benefits of a vastly more expensive SSD was pretty revolutionary.

The same thing is happening today. Micron is willing to take a back seat and let Intel work out all the bugs incorporating the speed benefits into their architecture and mobo designs.

Because at the the end of the day, Intel and Micron both know if they can nail the integration aspect both companies are going to be leaps and bounds ahead of the competition in performance.

[William Tidwell]

Well, interesting presentation, to say the very least. A mix of good and bad, with the biggest negative being the almost total opacity on XP. They did show one bit of very positive news on XP and that was its cost positioning very near NAND over the time it takes Micron to migrate to the 1 beta node on DRAM. That's probably 2021/22 timeframe.

The great news was on NAND, and DRAM was on the whole very positive.

The gigantic positive was the $10B buyback. That's worth 200 m shares at a $50 stock price - less of course if (as we certainly hope!) the stock appreciates significantly between now and FY '19. Still a really nice tailwind to the EPS...

[kscopes]

William Tidwell:

I also was surprised to have the XP can kicked down the road once again. As you say: :The great news was on NAND and DRAM. From the bleacher seats point of view, could this not be because they are killing it more than predicted on the N&D and so they would just as well rake in the $$$ while the gettin is good?

[oak8292]

William

I also really like how competitive they have become in both DRAM and NAND.

I think that Micron is just a passenger on the XPoint ride. It seemed like they promised more information in the last quarterly conference call.

This fall Intel will release processors that are XPoint DIMM compatible. The Micron message seemed to be that they would not have any DIMMs when the processors are released?

I found it interesting that they now have "Replacement Gate" technology for Gen 4 NAND? Which include great improvements in power and bandwidth? Maybe Intel is going to XPoint SSD's after 96 layers and Micron will compete with RG NAND?

The 1z DRAM should also be interesting. Samsung may be using EUV while Micron sticks with quad patterning. Micron thinks the costs of EUV are too high and so bit density may not tell the whole story on bit cost.

[linklinklink]

I'll put my tinfoil hat on.

Is it not out of the realm of possibility that the government has stepped in here and implementing this under the table before the general public and major corporations have mass access to it?

This would explain the delay as well as the limited speed offered in Intel's current Optane production. We know for a fact that the faster controllers are available by Marvell, etc. right now.

[ND1981goIrish!]

I'm from Jersey - The Boss rocks! So far today I'm listening to "Born to Run". Thanks for your analysis and commentary on Micron WT. Greatly appreciated!

[doggiecool]

The Boss would be considered racist-zeno by the fake media, for his 'born in the USA' song

[johndkopta]

Oh good Doggie,

What are we going to do with you, my The Donald believing friend?

Well.. it takes all kinds in this world. Little tune for ya:

http://bit.ly/2rZNbtJ

PS. ya do know it's "xeno" , right?

Unless, of course, we are entering a dialectic about the racist paradox, for assuredly it would be impossible to be about the Stoicism of Mr. Trump.

[johndkopta]

Hey good Mr. T,

A tad early, but given the pre-announce,

"SMOOCH"

as promised, right on top of that beautiful head.

Thanks my wise friend, and, of course, a tune.

Knowing your fondness for The Boss (and if there's a good Mrs. T, I recommend to follow his first-rate advice):

http://bit.ly/2s06sLr

Peace.

[William Tidwell]

jdk,

Thanks. Love that tune!

[ND1981goIrish!]

Expect some profit-taking and sideways action tomorrow and possibly Friday.. Micron closed at just above the low of the after-hours session today and was the 3rd most active AH stock. Hopefully the uptrend will continue with good news flow from the May 21st Investor event next Monday. Nothing goes straight up without "the pause that refreshes". Good luck to all Micron longs

[ND1981goIrish!]

Without multiple expansion, if these estimates are anywhere near reality then why would anyone want to be long Micron???

[William Tidwell]

ND,

the only way these estimates come true is if there is a massive externality which changes current market conditions. Certainly that's possible with all the trade issues looming but right now I'm not assuming it in 2019 models. With 33% ASP decrease for NAND and flat ASP's for DRAM in 2019 I'm modeling $12+/share. It's going to take a massive shock to knock down DRAM pricing enough to produce the estimates above.

[Timmy41]

Still predicting lower earnings though.

QUARTERLY MODELWARE EPS ($)
2018e 2018e 2019e 2019e
Quarter 2017 Prior Current Prior Current
Q1 0.25 - 2.40a - 2.19
Q2 0.84 - 2.78a - 1.82
Q3 1.56 - 2.82 - 1.47
Q4 1.96 - 2.76 - 1.28

[i_am_seeker_2]

Chip stock Micron to rally nearly 35 percent on ‘exceptional’ cloud computing demand: Morgan Stanley

Morgan Stanley reiterates its overweight rating for Micron shares, saying demand for its memory chips will remain strong.
"Near-term conditions are in fact exceptional, and the exceptional cloud spending that has driven such conditions seems likely to persist. So, our 'stronger for longer' thesis remains intact," the firm's analyst writes.

https://cnb.cx/2IxFuVE

[GAlan]

Seeker, first time I've seen an analyst mention that MU's NAND cost declines will match the NAND asp decline.

[Randall A. Dass]

I believe that Morgan Stanley putting into writing the observation that ASP decline can be offset by production efficiencies/cost declines will be helpful in allowing other analysts to begin to understand the current/future memory environment. Perhaps inception will occur and the idea will spread. Like a virus but a virus with positive outcomes.

[JOE STERN]

For years I have been hanging up on a telemarketing computer named Heather. I wonder if that was this project. I never stayed on the line long enough to find out what she or it was selling.

[johndkopta]

Man, that girl gets around.

[linklinklink]

Finally... everything we said was going to happen is happening right now...

Welcome to 2018 everyone! :)

http://bit.ly/2It0w8c

[bubbleking]

Wow. I could use this for a bunch of menial tasks.

[linklinklink]

@William

Are you accounting for an increase in NAND sales? Micron's MX500 as well as their 2TB 32L $300 black drive on Amazon has to be making a huge dent.

Even though the 32L isn't on par with the MX500, I was debating about ordering one just on the pure value standpoint. I'm sure a lot of other people have made purchases.

[William Tidwell]

l3,.

No. For now I'm staying very conservative with my NAND fcst. Any good news on NAND this Q will be upside for my model. On the plus side, Micron has some world-beating 64L product. On the negative side, my guess is that they are having to discount their 32L product. I've got NaND rev and GM flat QoQ.

[flintstone277]

Doggie, which company in the world do you think does anything because its the "honorable" thing to do? I am very much in favor of doing the "honorable" thing, but companies are not prone to doing that and I don't think (IMHO) that MU is under any obligation to pre-announce if that is what you are implying by saying that they should do the "honorable" thing. Regardless of how much I or anyone else might want them to do that, they are not "duty bound" or under any other pressure to give us a heads up. My contention is merely, that pre-announcing makes the whole process more prone to gamesmanship because it makes it a two-step process as opposed to just waiting and making it one fell swoop all at once on the date of earnings release. So your point (I think) is that we agree: "gamesmanship can only occur with time. Eliminate time or reduce it and you eliminate or reduce the gamesmanship." Take out the time between pre-guesstimates and just do it all at once. Am I right?

[linklinklink]

Not pre-announcing if the results are far above their estimate and delaying announcing by a month gives a greater opportunity for leaks. I have no doubt information is passed from those in the know within major corporations and wall street traders. If anything pre-announcing at this point is probably better for us retail investors.

[doggiecool]

I agree with l3

[khanjar24]

Not if some of the slack jawed idiot-analysts, the ones that fell asleep during prior quarter DRAM pricing get whipped in the face by MU's blowing out expectations. Here, see this 2 months ago: https://seekingalpha.c...
"Upside Q3 guidance has revenue from $7.2B to $7.6B (consensus: $7.29B) and EPS from $2.76 to $2.90 (consensus: $2.66)."

The consensus for Q3 earnings before the guide was 2.66. The guide sets that at 2.83 midpoint, and David_Li has some exceptionally bullish estimate around 3.20. Current analyst estimate is 2.84 per WSJ w/ 22 analysts, but more hilariously/importantly, the Q4 estimates are absurdly wild positive and negative, TD Ameritrade has the low Q4 estimate at 2.52, and a high at 4.12(lol?), Nasdaq has it as 2.62-3.19. I think pricing moves slow enough that we can start writing off some of those low ends, as it would require a precipitous and catastrophic pricing collapse, those are the sleeping analysts, the ones that made some model or assumption tweaks 2 months ago and haven't reviewed it since.

[GAlan]

Micron is and has been emphasizing their early collaboration with partners in relation to
DDR5.

The critical factor is to engage in partnered efforts with the ecosystem early to enable the successful rollout.

http://bit.ly/2IkJHMx

Seems as if they are working hard to decrease qual times for this important DDR5 product.

[flintstone277]

Doggie, are you "tongue in cheek" here? I do agree that there is plenty of manipulation going on, but it's not because of whether or not the company pre-announces. It's going to get manipulated either way. So be it. I'll take my chances, but pre or not is NOT the problem, it only provides another "opportunity" toward gamesmanship. IMHO

[doggiecool]

flint,
gamesmanship can only occur with time. Eliminate time or reduce it and you eliminate or reduce the gamesmanship.

Immediately announcing earnings when they are calculated is the honorable thing to do.

[JOE STERN]

flintstone:
I agree, do not preannounce, don't ruin the surprise. If it runs up before the earnings release, it will plunge afterward just like so many times before.

[doggiecool]

yes folks,
a company shouldn't pre-announce.
That way all the bookies in vegas and all the I-Banks can place their wagers, prior to the conference call... and thus, continue to facilitate the 'MU stock is rigged' game.

brilliant!

[flintstone277]

Joe, I agree, there is a bit of "gamesmanship" in the art of disclosures, but by not pre-announcing, they get to leave all the bang in the mix for one big presentation. That way they don't have to pre-announce good numbers only to then beat those numbers a few days later. So, while there are always pros and cons, I prefer to get it all in one fell swoop. That way, everyone gets it all, all at once. Then they can do with it as they wish, but it takes out that extra step of "gamesmanship" of pre-announcing in my humble opinion.

By the way, either way, it's going to be a GREAT report, IMHO.

[JOE STERN]

3Link:
My opinion is that all companies should give an honest assessment of business conditions and vaguely state their targets for sales and expenses but not forecast their earnings. Companies who consistantly beat estimates are expected to continue to do so, and get slammed if they only beat by a penny or two. You can fool the street only so long before it doesn't work any more.

[linklinklink]

Question for everyone. Since the EPS for Q2 was $2.82 and they sandbagged the guidance for Q3 at only $2.83. If Micron sees results to be substantially above this ridiculously conservative estimate do they have an obligation to pre-announce earnings on May 22nd?

My feeling is that if they do make an announcement that it will be in the $3.05 - 3.1 EPS range, meaning the Q3 will likely be 10 cents above that.

[doggiecool]

I always thought if a company knew they were going to beat or miss by a significant amount and it was still weeks before conference call, that they were obligated to preannounce. However, others on SA insist they are not obligated to preannounce. Not preannouncing, leaves a large window for insiders to act on said information.

[LuckyLinny]

Doggie- They are under no legal obligation to pre announce and insiders are in a blackout period under which they can't trade.

[LuckyLinny]

LLL
If history is a guide, earnings beats by Micron are largely ignored by the market, unless they miss in which case the stock will be hammered down. Same goes with next quarter forecasts....if they raise estimates it has no impact. Despite all the talk about TTID, Mr. Market seems to be convinced that at some point the party is going to end and they don't want to be holding shares at that point.