A month or so back Micron reported earnings that were a blow-out on any count, whether one is a dark-sider or is long the stock. The company reported earnings of $0.90 per share on revenues of $4.65 billion. The Street was expecting $0.85 per share and $4.64 billion going into the earnings event.
Most importantly, Micron guided the current quarter to a range between$1.43 and $1.57 per share ($1.50 per share at mid-point) for earnings and revenues between $5.2 billion and $5.6 billion ($5.4 billion at mid-point) for the current quarter ending in May. Consensus ahead of the earnings report had been $0.95 per share on revenues of $4.77 billion. So, a guide up of 58% for earnings and a guide higher by 13.2% for revenues.
The sell side was ecstatic and most of the analysts raised their price targets post the earnings report on March 23, 2017.
Shares of Micron popped to a high of $29.87 the next day on heavy volume of over 100 million shares traded before closing up 7.4% on the day at $28.43 per share.
Since then, shares have mostly drifted lower as the noise regarding DRAM supply and pricing waxed and waned depending on who one was reading. The range of targets I have sen are anywhere from a low of $35 per share to a high of $47 per share.
A few days later ex-CEO Mark Durcan said that he did "not see a big new wave of supply coming (into the market)" and that the company was seeing extremely favorable market conditions.
A day later DigiTimes reported that Cypress Semiconductor was raising prices for flash (including NR flash, RAM MCP, NAND flash and SLC NAND chips) due to tight supply.
On April 10 news broke that certain employees of Micron in Taiwan had been arrested by authorities there due to suspected theft and misuse of company intellectual property. Shares dropped by a buck per share as the boo-birds insinuated that the company was involved in something fish in Taiwan.
Despite the company posting the following on its blog, Micron shares continued to drift lower by a buck or two over the next few days.
"Criminal prosecutors in Taiwan have been conducting ongoing investigations that resulted in the recent arrests of individuals for the suspected theft and misuse of Microns intellectual property. Micron supports these investigations and is cooperating fully with the authorities ? including both the Taiwan Ministry of Justice Investigation Bureau and the U.S. Federal Bureau of Investigation. Micron aggressively protects its intellectual property. In the event that an individual or company, wherever located, tries to steal rather than license Microns technology, we will use all legal and appropriate tools available to prevent, detect, and punish such efforts. Microns proactive IT initiatives to monitor and identify inappropriate activity were instrumental in the authorities ability to proceed with their investigations."
Seagate and Western Digital both reported numbers within the last couple of days and while Seagate stock got clocked on results and tepid guidance, Western Digital shares were up over 7% last night after reporting a blow out number and raising guidance by over 20% for the current quarter.
Here's what Western Digital said on their earnings call last night, "Industry-wide demand for NAND flash remained very strong and the industry-wide hard drive demand was stable, together contributing to a favorable environment for our overall business. Demand was healthy across all of our end markets and has helped mitigate typical seasonality.
The Street currently expects Micron to earn $4.30 per share for the current fiscal year and to earn $5.15 per share for next year. Just 90 days ago, the sellside was expecting the company to earn a "mere" $2.40 per share and $2.75 per share respectively. Quite the bump up, no?
Currently trading at 6.5x estimated earnings for the current year and at 5.4x estimated Street consensus for next year, shares of Micron are cheaper than dirt.
Yes, the boo-birds and kindly uncles will wring their hands and weep copious tears while saying how investors should heed their warnings to head for the hills, however, at current multiples, even they will be hard pressed to keep their thesis straight.
Finally, even though Micron operates in a demand and supply cycle that can be described as whimsical at best, the shares could easily be worth as much as 2x where they current trade, in a perfect scenario (with just a current market multiple). Even given the ebb and flow of its demand cycle, Micron shares are just too cheap to ignore at current levels.
By the way, hiring Sanjay Mehrotra, co-founder of Sandisk, as CEO and President of the company was a pretty savvy move as well by the Board of Micron.
Three choices for investors, buy somewhere in here or buy the shares higher.
Or, one can continue chasing Western Digital higher, post its results last night.
Words to the wise.
(Long mu, mu calls)