Guys - for those in or interested in Micron (MU), whilst the markets were going bananas this last week, you may not have noticed Micron updated on their expected results.
The update was mind blowing and destroyed any negative expectations of an early roll over in the memory pricing cycle.
2 houses have upgraded immediately since…
If you want to draw a read across to Pure Storage and the demand picture for memory feel free.
I added to my growing MU position on Monday’s dip. I initiated this one last Fall (my tracking sheet says mid-November) after looking at the books – some of the numbers are staggering, and it seems like Wall Street hasn’t caught up, or is still stuck on past cyclical performance. The short interest on MU was also high at the time, so if my hunch was right, it was going to take off. Hasn’t happened quite yet (yesterday’s 11% bump notwithstanding!), but I hope I’m there when it does!
The only thing I still don’t like is their investor relations seem to kind of suck. Ok, not really kind of. I was being nice. But they do seem tight-lipped about stuff we’d like to know about, so maybe a bigger deal is cooking somewhere…
/long MU (and NVDA, and looking to go long PSTG)
Ok as you know I have been advocating Micron since most of last year and have regularly updated the board on developments. Yesterday proved particularly newsworthy/noteworthy with the receding of the trade wars threat overhang as well as some astonishing updates with material upside potential as well as risk mitigation potential. I’m now awaiting the street upgrades to follow.
1) Micron held their investor day
Of interest to anyone interested in cloud data storage capex numbers (read across to AWS/Azure/Google/Nutanix/Pure Storage/Ali Baba/IBM etc)
Also if you want to understand the supply and demand pressures relative to node processes and bit growth and the impact on pricing of Nand and DRAM…
and if you want to understand Micron’s innovation quotient…
Here’s the transcript…
2) Micron announced a $10bn buy back
3) Micron committed to distributing 50% of free cash flow from next year (dividends)
4) Micron announced an update on shipment with Intel to drive 3D X point
5) Oh and by the way they announced raised Q2 guidance by a massive amount
For the fiscal third quarter, on a non-GAAP basis, the company now expects:
Revenue in the range of $7.70 billion to $7.80 billion compared to prior guidance of $7.20 billion to $7.60 billion.
Earnings in the range of $3.12 to $3.16 per share compared to prior guidance of $2.76 to $2.90 per share, based on 1,238 million diluted shares
I’m tempted to add at close to its high on the back of this. My last “buy high” addition was at $42. P/E (6 and declining) is in single figures and PEG is probably the lowest of any company on the stock exchange at (0.00000 something). Some of the most successful billionaire investors have just got a helluva lot richer from this stock so far this year. It’s only a 2.5% holding for me but I feel like it should be much higher.
Some of the most successful billionaire investors have just got a helluva lot richer from this stock so far this year. It’s only a 2.5% holding for me but I feel like it should be much higher.
Micron’s market cap is pushing $70 billion now. They’re going to buy back $10b worth of stock – at today’s prices that is 1/7th of all the stock they have outstanding!
So call the post repurchase market cap $60b. I see no reason that Micron isn’t more like a $120b company. For a back of the napkin comparison, Intel will have a bit more than twice as much revenue this year, and it’s got a $250b market cap. But Micron is growing much faster.
Thoughts? Is Intel a fair comp? It’s a lot larger, but they’re both huge. And aren’t they both benefiting from some of the same trends?
Bear - I agree the market cap should be much higher - probably more than 100bn but to be equal in p/s to intel it would have to be equal margin, equal competitive position, equal moat and equal cyclicality.
It probably is not equal to intel on these fronts but certainly is more it’s equal on growth.
I would probably ascribe maybe up to a 20% discount so probably around the 100bn at least which is still a 65% gain from here.
Hello Ant -
I am invested in MU. Appreciate all the information you linked. One of my research projects is SGH… To me they are a smaller version of MU. Do you hold this company or shown any interest in owning it?
Cliff - thanks for the feedback. Always good to know one is not talking to oneself.
Not aware of SGH but from a quick glance at the numbers, I’m very interested.
Thank you for all details on Micron. My husband was following it and I had ok amount of cash sitting in my Ameritrade account doing nothing. So he decided to use it for day trading. Bought a tiny bit of MU and a lot of AMD. I wasn’t doing any investing at all then (Jan 2018) but decided to finally look in that account. When I saw MU climbing, I sold all of AMD and added to MU at $59 before earnings. Then it dropped back to $46 or so, as you know, and I regret not adding more, but I think it is worth adding even at the high… glad that Micron sparked my interest and I didn’t let him sell it.
Thanks again for posting.
SGH came up on my radar last month and I bought a small starter position. I was hoping to find some discussion on it here, but at first glance, the numbers look good. I don’t have the experience with deep dives like some here so I’d be interested in hearing others’ take on it or if they spot any red flags that would say “keep away”.