Author Topic: MU - Micron Technology Inc.  (Read 18499 times)

cemadh

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Re: MU - Micron Technology Inc.
« Reply #20 on: July 11, 2013, 12:33:28 PM »
I do not see any posts on Micron Technology (MU) since Feb 2012. Any reason why?
MU is supposed to close the Elpida acquisition at the end of July 2013.

There are some articles in the press that say that MU (post-Elpida) could earn between $2.25 to $3 per share in GAAP earnings next year depending on how DRAM prices and DRAM and NAND demand shape up in the coming months/quarters.

At $12.71 per share that equates to a PE ratio 5.65 to 4.24. Cheap?
There are other metrics that also seem to indicate that the Elpida acquisition and projected NAND and DRAM demand will be prove to be very good for MU.

Is it a good buy at this level?
By the way - thanks to Ross for starting this thread with an excellent write-up on MU way back in 2010. 


ItsAValueTrap

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Re: MU - Micron Technology Inc.
« Reply #21 on: July 11, 2013, 01:35:21 PM »
If you look into the history of Intel... it started off as a memory company.  Then they starting losing a lot of money in the business.  Andy Grove took a long time to get Intel out of the memory business... but fortunately for Intel he did.  Intel subsequently morphed into a very successful microprocessor company.

The memory business is scary and ugly.  The main competitive advantage is scale.  Unfortunately, it means that many industry players will overbuild capacity because they are all trying to get bigger.  Then everybody loses a lot of money.

The market leaders in memory are no longer the market leaders today.  Many of these companies have gone out of business over the years.  Historically it has been a crazy and ugly business.
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moody202

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Re: MU - Micron Technology Inc.
« Reply #22 on: January 18, 2014, 09:15:37 AM »
Just checking what you guys think of MU given investment by David Einhorn and the recently Quaterly results!
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racemize

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Re: MU - Micron Technology Inc.
« Reply #23 on: January 22, 2014, 02:43:46 PM »
It is also the largest equity holding of Baupost, probably worth looking into.

dbuch

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Re: MU - Micron Technology Inc.
« Reply #24 on: April 07, 2014, 05:31:27 PM »
I think Micron is definitely worth looking into. You have a consolidated industry with just three players in DRAM: Samsung, Hynix and Micron. The DRAM players will most likely not be focused on market share but ROIC going forward. Gross margins have already risen to 34% and could reach mid 40% very soon. The DRAM industry is expecting 27% CAGR through 2017 and supply is now matching demand which should mean very little price degradation. If demand rises 27% and prices remain stable (with oligopoly no reason they should compete over price) you'll experience 27% revenue growth. Micron is 80% DRAM 20% NAND so this should drive the stock. Micron should have $16B of revenue this year with near 40% gross margin which would imply near $3 EPS (near $4 EPS with current low tax rate). As demand increases at a healthy CAGR you should get very healthy incremental profits on each dollar of revenue growth. Assuming a 20% revenue growth over next couple of years should easily get you $5+ of EPS and FCF. Once the market believes the story I don't see any reason it couldn't trade at similar multiples as other consolidated industries such as the rails or hard drive manufacturers. I think this is what Klarman and Einhorn see and the reason they believe it is a low risk, high reward investment. I just wanted to check and see if anyone else has done any further due diligence on this.

yadayada

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Re: MU - Micron Technology Inc.
« Reply #25 on: April 07, 2014, 06:37:28 PM »
If you look into the history of Intel... it started off as a memory company.  Then they starting losing a lot of money in the business.  Andy Grove took a long time to get Intel out of the memory business... but fortunately for Intel he did.  Intel subsequently morphed into a very successful microprocessor company.

The memory business is scary and ugly.  The main competitive advantage is scale.  Unfortunately, it means that many industry players will overbuild capacity because they are all trying to get bigger.  Then everybody loses a lot of money.

The market leaders in memory are no longer the market leaders today.  Many of these companies have gone out of business over the years.  Historically it has been a crazy and ugly business.
Yeah but dynamics can change. There used to be alot more players, and now there are only a few. WIth more smaller players you have more risks like this no?

But yeah i really liked this 10-12$. But now it doesn't seem so safe anymore.

It seems when there is even 1 weak player competing with them (or more in this case), then the stronger players have a very large incentive to drive down prices to drive out the weak players and try and get some of that market share. But when you have only a couple large financially strong players left, that incentive is no longer there right"? Im just thinking out loud here. So now the rational thing to do is not really to try and drive out any of those large players,  because in the long run that probably wont get them much market share and kill profits for everyone.

This is pretty informative, there were 6 players only a few years ago, and now there are 3.
http://thememoryguy.com/dram-consolidation-in-2012/

http://www.theregister.co.uk/2013/03/19/micron_flash_numero_uno/

This is also interesting. I think it is worth looking into.
« Last Edit: April 07, 2014, 07:22:26 PM by yadayada »

yadayada

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Re: MU - Micron Technology Inc.
« Reply #26 on: April 07, 2014, 08:17:24 PM »
oh and whatever your opinion is, just  look at the LEAPS here? you get almost 2 years for the market to get rational.

http://finance.yahoo.com/q/op?s=MU&m=2016-01

With only 2.10$ in EPS, that is a 25$ share price. What about the 20$ calls here? at 25.80$ you break even. Doesnt that look pretty cheap?

Depending how high conviction this is. What I like is, that depending how solid the thesis is here, I dont really see the market stay irrational and at a multiple of like 6-7 here. They are also buying back shares this year.

with 3.50$ in earnings that is more then 42$  a share I think.

dbuch

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Re: MU - Micron Technology Inc.
« Reply #27 on: April 08, 2014, 06:33:07 AM »
Thanks for the links, they give a good history of the DRAM business.

I actually do own several of the 2016 LEAPS and the stock. I think without subsidized players and Samsung (40%), Hynix (24%) and Micron (25%) controlling the market, the supply will be much more rational. If you listen to the latest Hynix, Micron or Samsung conference calls they all talk about being more rational with supply, more stable pricing, slower transitions to the next node etc.

On Samsung's last CC

<Q>: I have a question regarding the Memory business. The companies have been trying to restrain from supplying or increasing the supply of DRAM, but we’re now seeing some of the companies actually increasing their CapEx as well as increasing their capacity. Does this imply that you may, from Samsung Electronics’ perspective, see more than a growth – a growth higher than the mid-20% for in terms of bit shipment?

<A>: As we’ve mentioned in previous earnings conference calls, in 2014, we have no plans of increasing physical capacity on the DRAM side. The other companies are investing currently in terms of capacity and CapEx, but I don’t think those investments will lead to capacity increases during this year. The investments that are made – being made currently by the other companies will probably come online in H2 next year or after that, which leaves us the only option of migration. But in order to migrate, there is a limit in terms of the physical space additionally that we can use. And in addition to the investments, migration itself takes time. So due to all of these considerations, in 2014, we still believe that the potential bit growth would be limited.

The only additional supply planned is from technology shrinks and is expected to grow below or in line with overall demand. This means prices will remain stable and revenues growth will equal demand growth.

Samsung has another reason to keep prices higher. Their major competitor is Apple and Apple must buy DRAM for their devices from Micron or Hynix. The higher the price of this input the more pressure on Apples margins giving Samsung, who is vertically integrated, more competitive leverage. So all three have huge incentives to act rationally.

It also seems incredibly difficult for new entrants. There is technology know how, patents, not to mention the cost of building a state of the art fab is probably $5B. Also any new entrants would know the minute they enter the market and try to build market share, prices would drop ruining the economics they sought after.

The one risk with all technology companies is obsolescence but DRAM technology has been around for 40+ years as a way of storing temporary data so doesn't seem like technology will completely wipe out the need for memory devices any time soon.

Just a back of the envelope calculation: If I assume $21B in revenues in 2016 with a 45% gross margin and $2.7B in SG&A and R&D, I get $6.6B of Operating Income. Subtract interest of $250M and 35% taxes (that's GAAP not actual which is likely much less) gives you $4.2B of Net Income on 1.1B shares gets you $3.8 EPS. If I throw a 13x multiple on that I get a $50 stock price or 31% annual return over the next 3 years. Lots of assumptions there but I don't think that's too crazy.

 


dbuch

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Re: MU - Micron Technology Inc.
« Reply #28 on: April 21, 2014, 05:48:56 AM »
Drexel Hamilton Raised price target to $50. Does anyone have their thesis?

dbuch

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Re: MU - Micron Technology Inc.
« Reply #29 on: April 24, 2014, 11:24:59 AM »
Hynix reported.  It sounds like they plan on remaining rational with respect to supply.

On the supply side, factors like suppliers switching their DRAM capacity to NAND, process migration to 1X nano and
increased share of TLC and start of 3D product production may have negative impact to the overall supply-demand
situation. However, since most of the capacity conversion have been completed and since the suppliers will continue to
make efforts to maintain supply-demand balance in case of weak demand, the overall supply-demand situation will
improve starting in the second quarter.

Under such market circumstances, SK Hynix will focus on profit-oriented business management and try to achieve
qualitative growth rather than quantitative growth
. At the same time, we will make our best efforts to preparing
next-generation products to take a great leap forward and to building the growth infrastructure to generate stable profit
for a long time.

If you look at other players like [ph] Intel or Micron (32:38), overall, there is some shortage in the overall industry capacity. However, due to technology migration efforts and – they're not really – the bit shipment is currently not very high. When about do you believe that they're going to start investing in the capacity expansion, because right now their free cash flow level seems to be relatively high? So we want to know at the company level, what's your planning to do?

Regarding your second question, which is about the capacity increase for DRAM in the long-term. Well, on the
short-term, we believe that the overall players are likely to maintain their current capacity, just maintaining the
operation at the maximum level, and the wafer capacity will slightly drop. However, if you look at the long-term
outlook, while it's difficult to forecast the future, but we believe that in the next two, three years there won't be any
major capacity expansion
.
Everything will depend on how people view about the demand growth. However, we believe that as a Hynix point of
view, we are not really planning on any capacity expansion in the next two to three years.
Everything actually depends
on when the new generation technologies will settle in.