The closely watched SOX semiconductor index continues to heat up the industry. My favorite continues to be the Idaho chipmaker, Micron Technology (Nasdaq: MU) whose huge stock
buy back and refinancing of outstanding debt should help boost the stock and the sector. Since I recommended this stock on September 24th, MU has soared 23% rising from $6.67 to $8.14 (The chart to the left shows MU’s progress). These recent moves give me more assurance that this stock will continue to rise on up. Shareholders should continue to hold onto MU and those who aren’t invested buy on the dip. Barron’s did a report on Micron’s move calling it a “significant positive” for shareholders, below are the rest of the details:
“Micron Technology this morning announced several related to moves to reduce its debt position.
- The memory chip company is buying back $91 million of its 4.25% convertible senior noted due 2013.
- It will repurchase $176 million of its 1.875% convertible senior notes due 2014.
- And it will exchange $175 million of the current 1.875% converts for $175 million in new 1.875% convertible senior notes due 2027.
After the transactions, Micron will have outstanding $139 million of the 4.25% notes, $949 million of the older 1.875% notes and $175 million of the 2027 notes. The company said the moves are intended to reduce costs of capital and dilution. In connection with the moves, Micron will take a $90 million one-time charge. The transaction will also have the effect of reducing fully diluted share outstanding by about 43 million.”
Moving on their are many other reasons to be in love with Micron:
1. Q2 sales soared roughly 100% from the year before to around $2 billion
2. Individual memory products sales grew 106%
3. The two main forms of memory, DRAM & NAND, grew 173% and 32% making them key drivers to the future growth
4. In as little as a year, MU turned a loss of $763 million into a gain of $365 million
5. Currently MU is trading at only 7 times expected earnings. To put this in comparison, Sandisk (close rival) trades at 14 times while having not as strong earnings and growth projections.
6. MU has a steady cash flow and has made several key acquisitions and investments to continue to be competitive, producing a 35% return of equity in the past year
Overall I believe Micron still has the potential to rise all the way to $13 and I am still recommending you buy in.
Disclosure: "Long MU"