Thursday, December 21, 2006

Calls of Note Part 4

- ThinkEquity's ever-wonderful Eric Ross is previewing Micron's (NYSE:MU) qtr saying he believes MU will make the consensus estimates, which would beat the "whisper" that the company will miss. He expects this to be a meaningful positive, as he think a miss is already priced into the stock. Mr. Ross think shortages in DDR2 and stable contract pricing are the most likely drivers, with some support from sensors. He believes that strength will be partially offset by weak NAND, and that specialty DRAM (for cell phones) is a concern due to burgeoning cell phone inventories. Reiterates ACCUMULATE rating.

Every Taiwan PC participant told the firm of DDR2 shortages. Demand appears to be good, and ODMs are "screaming" for inventory. Contract prices are stable. Demand appears to have cooled somewhat in December, although this is typical in December, and demand appears stronger than typical seasonality.

Sensors are likely positive as well. The transition to higher density sensors is keeping ASPs solid. OVTI is likely playing at the low end relative to MU, which likely isn't seeing the pricing pressure that OVTI (OVTI) is seeing.

NAND is weak, but likely a small portion of revenues. MU is fortunate to have such little exposure to NAND (under 10%). Mr. Ross notes he is a bit worried about specialty DRAM. The majority of this segment is pseudo SRAM for cell phone handsets, and he is concerned about growing inventories in handsets. Even if this segment reports well this quarter, he believes it may be tougher in the following quarter.

MU shares are trading at 11.4x firm's estimated CY07 EPS of $0.86 (net of cash and debt), at a discount to Universe at 17.9x.

Notablecalls: Well, you know where NC stands regarding Micron. Anyone think MU can run into tonight's release?

Long MU.

No comments: