I started this blog to track my previous equity research calls and see how my analysis turned out. This is a short report I initially put together last December in 2018 for an interview (prepared within 3 days) which eventually went unused since the interviewer did not ask for a stock pitch. Nevertheless, I enjoyed the process and wanted an avenue to store it somewhere for future references and also to share it with others. Micron in that time period had been somewhat of a "meme" stock with general consensus being divided between it being an overly cheap stock vs a falling knife in a memory downcycle.
Between the time of writing of the report and today (Apr 6), MU has gained closed to 15% on the back of easing trade tensions between US and China, as well as a marginal Q2FY2019 earnings beat. The cancellation of a sizeable DRAM order from Samsung by Amazon also added fuel to the rally, as possible Samsung chip design flaws might lead the tech giant to consider a switch to Micron or SK Hynix as alternative suppliers.
However, challenges for the memory semi industry have persisted as DRAM and NAND prices continued to plummet for the 1st quarter of calendar 2019. Samsung and Micron have voiced their decision to start cutting supply as inventories are beginning to swell. This is possibly good news as a concerted production cut by the 3 big players would do well to ease the chip glut and provide resistance to the price weakness. This would benefit all 3 players in terms of gross margins and ultimately the bottom line, in this heavily commoditized industry driven by raw demand and supply.
I hope to update my model and report for Micron in another 2Q or 1Y time as we continue to monitor how the memory cycle plays out. I stand by my target price of ~$50 for Micron given my belief in rising underlying demand, their improvement in management and continued strong execution. Enjoy the report and feel free to leave comments regarding any thoughts or comments on the valuation.
Between the time of writing of the report and today (Apr 6), MU has gained closed to 15% on the back of easing trade tensions between US and China, as well as a marginal Q2FY2019 earnings beat. The cancellation of a sizeable DRAM order from Samsung by Amazon also added fuel to the rally, as possible Samsung chip design flaws might lead the tech giant to consider a switch to Micron or SK Hynix as alternative suppliers.
However, challenges for the memory semi industry have persisted as DRAM and NAND prices continued to plummet for the 1st quarter of calendar 2019. Samsung and Micron have voiced their decision to start cutting supply as inventories are beginning to swell. This is possibly good news as a concerted production cut by the 3 big players would do well to ease the chip glut and provide resistance to the price weakness. This would benefit all 3 players in terms of gross margins and ultimately the bottom line, in this heavily commoditized industry driven by raw demand and supply.
I hope to update my model and report for Micron in another 2Q or 1Y time as we continue to monitor how the memory cycle plays out. I stand by my target price of ~$50 for Micron given my belief in rising underlying demand, their improvement in management and continued strong execution. Enjoy the report and feel free to leave comments regarding any thoughts or comments on the valuation.
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