Micron Technology (MU)

I like Micron Technology (MU) after the stock was sent down from above 30 $ per share to around 18 $ per share. Here is how Factset describes Micron:

“Micron Technology (MU), Inc. provides semiconductor solutions. It manufactures and distributes semiconductor solutions. It manufactures and markets DRAM, NAND Flash and NOR Flash memory, as well as other memory technologies, packaging solutions and semiconductor systems for use in computing, consumer, networking, automotive, industrial, embedded and mobile products. The company operates through four segments: Compute and Networking Business Unit (CNBU), Mobile Business Unit (MBU), Storage Business Unit (SBU) and Embedded Business Unit (EBU). The CNBU segment includes DRAM and NOR Flash products sold to the computing, networking, graphics and cloud server markets. The MBU segment includes DRAM, NAND Flash and NOR Flash products sold to the smartphone, feature phone and tablet mobile device market. The SBU segment includes NAND Flash components and SSDs sold into enterprise and client storage, cloud and removable storage markets. SBU also includes NAND Flash products sold to Intel through its IMFT joint venture. The EBU includes DRAM, NAND Flash and NOR Flash products sold into automotive and industrial applications, as well as the connected home and consumer electronics markets. Micron Technology was founded in October 1978 and is headquartered in Boise, ID.”

Micron is a cyclical business. The earnings are volatile, but the market has in the latest year been much faster to adopt production to align demand. 10 years ago, the business was really fragmented with a lot of players competing on supply and prices. Since then, there has been a lot of consolidating taking place making the 3-4 players left much more able to keep supply low and ensure they make money.
















Taking a look on the EPS numbers above the cyclicality of the business seems clear. But maybe the stock has been hit too hard on a bad quarterly earnings release and forecast? Here is what analysts according to factset are estimating going forward:





EPS fc.





The stock at 18 is trading at about 7 times projected earnings. I think the analysts are still too optimistic and the earnings will be lower. But it is my belief the stock has gotten way too cheat based on what I think is a cyclical button.  

Others players in the market are also indicating this:

“Tsinghua offered $23 billion to buy Micron. It’s important to note that July 14, 2015, turned out to be a big day for Micron Technology (MU). Lately, Micron has been in the news for its dismal 3Q15 results and the consequent fall in its share price. However, on July 14, Micron gathered news for a different reason. Micron got a $23 billion takeover offer from China (MCHI)-based Tsinghua Group.”



The takeover offer is clearly to low and indicates about 20 $ per share for a company that was trading above 30 months ago. But it is clear that there probably will be more consolidation in the business and maybe the Chinese will raise their bid to a more prober figure?

All equal I think it is a good choice playing on the recovery of MU and having a possible buyout situation to.