Several firms commenting Micron (NYSE:MU) after co reported Nov qtr last night.
- NC's favorite Eric Ross from ThinkEquity says the company saw strength across all of its business segments during the quarter, benefited by PC manufacturers buying up DRAM due to Vista and mobile phones moving to higher-resolution image sensors. Eric gives a nice overview segment-by-segment:
* Revenues for the computing DRAM were approximately $758 million, up 23% Q/Q, roughly 48% of revenues. Management said that demand is mostly driven by Vista, as the new OS is driving increasing memory per PC.
* Non-computing DRAM was approximately $348 million, up 1% Q/Q, roughly 22% of revenues. MU is worried that handset inventories will cause this segment to lag.
* NAND Flash was approximately $269 million, down 2% Q/Q, roughly 17% of revenues. Pricing was weak, but costs were lower than expected.
* Image Sensors was about $205 million, up 50% Q/Q, roughly 13% of revenues. Firm continues to believe that the main driver for this segment will likely be increasing Mpixels rather than attach rate.
- JP Morgan out cautiosly as expected given their recent downgrade. Firm notes gross margin upside due to higher than expected DRAM pricing (roughly 67% of F1Q07 revenue). However, the improved margins were offset by higher than expected operating expenses as the company ramps its new factories.
Inventories approaching record levels, which is a concern. While firm is positive on Micron's DRAM leverage, they remain concerned on the company's growing inventories. Days of inventory at Micron were up 9 days QoQ to 93 days, significantly above a normal level of 60-70 which adds risk to gross margins. Memory and sensor inventories grew sequentially.
- First Albany upgrading Micron to Buy from Neutral, saying that while they continue to believe that 1H:CY07 will be challenging for the memory makers, they also believe that this expectation is priced into MU shares. Firm also believes that 2H:CY07 and CY08 will be strong for the memory makers, particularly if other vendors hesitate to build capacity in 1H:CY07. FIrm believes that MU's valuation is compelling at current levels.
- Merrill Lynch sees Micron as short term trading opportunity of 20-25% upside. Firm doesn't think Micron is well-positioned enough or attractively valued enough to merit a buy recommendation. However, they note that DRAM pricing is expected to stay strong through the first part of next year, and Micron's stock has lagged the semiconductor sector and the broader market. They continue to see a short-term trading opportunity in the stock with a 20-25% range.
Rising capacity adds in the DRAM business raise the specter of overcapacity, and firm does think the risk of a sharp decline in pricing exists for the second half of 2007. For the next several quarters, though, the DRAM industry is clearly chasing demand.
Notablecalls: Maintaining my view from last night - MU is going higher today (and in the coming weeks) than the afterhours prices of yesterday. Out of the today's comments I'd point out Merrill's as this is the closest to my view. Think DRAM pricing will continue to surprise as PC manufacturers are getting ready for Vista launch. Looks like the process will help Micron through seasonally weaker Feb quarter and higher inventories.