Couple of cautious comments on Micron (NYSE:MU) and DRAM market in general:
- JP Morgan notes that memory pricing for DRAM components quarter-to-date has been weaker than our expectations due to excess capacity. In addition, firm's checks indicate component demand has been below their expectations at MU and QI due to excess inventory. As a result of the falling pricing and lower demand, they are lowering their estimates on MU and QI. While MU and QI stock have fallen in sync with the memory price declines in anticipation, the firm believes Consensus estimates will require additional "resetting" in the coming months and remain cautious on memory stocks.
- Bear Stearns says that based on channel checks with the DRAM supply chain, they expect DRAM pricing to remain under pressure for the remainder of C1Q07 and through almost all of
C2Q07. Firm's checks lead them to believe DDR2 spot and contract prices should decline further by about 15% from current levels before bottoming in the June timeframe. This follows declines of ~10% in 1H March and 20% in February for DDR2 contract prices. Inventory continues to rise in the channel which is expected to lead to a period of inventory digestion even after demand reacts to the recent price declines.
The price weakness is being driven by supply -- with Samsung, Elpida/Powerchip, Qimonda significant contributors to supply growth in C1Q07 -- and pressure from PC OEMs to lower prices following the stability in 2H06.
Bear is lowering their May-Q revenue estimate on MU from $1,457M (+0.8% QoQ) to $1,344M (-7.0% QoQ), based on a lowering of their DRAM ASP estimate from -11% QoQ to -21% QoQ. Firm is lowering their GM from 27.3% to 23.4% and GAAP EPS from $0.06 to $(0.05), significantly below consensus of $0.15. They would remain on the sidelines on Micron stock and see further downside pressure on the stock.
Notablecalls: Lousy call alert on MU. Hope you kept a tight stop.
- JP Morgan notes that memory pricing for DRAM components quarter-to-date has been weaker than our expectations due to excess capacity. In addition, firm's checks indicate component demand has been below their expectations at MU and QI due to excess inventory. As a result of the falling pricing and lower demand, they are lowering their estimates on MU and QI. While MU and QI stock have fallen in sync with the memory price declines in anticipation, the firm believes Consensus estimates will require additional "resetting" in the coming months and remain cautious on memory stocks.
- Bear Stearns says that based on channel checks with the DRAM supply chain, they expect DRAM pricing to remain under pressure for the remainder of C1Q07 and through almost all of
C2Q07. Firm's checks lead them to believe DDR2 spot and contract prices should decline further by about 15% from current levels before bottoming in the June timeframe. This follows declines of ~10% in 1H March and 20% in February for DDR2 contract prices. Inventory continues to rise in the channel which is expected to lead to a period of inventory digestion even after demand reacts to the recent price declines.
The price weakness is being driven by supply -- with Samsung, Elpida/Powerchip, Qimonda significant contributors to supply growth in C1Q07 -- and pressure from PC OEMs to lower prices following the stability in 2H06.
Bear is lowering their May-Q revenue estimate on MU from $1,457M (+0.8% QoQ) to $1,344M (-7.0% QoQ), based on a lowering of their DRAM ASP estimate from -11% QoQ to -21% QoQ. Firm is lowering their GM from 27.3% to 23.4% and GAAP EPS from $0.06 to $(0.05), significantly below consensus of $0.15. They would remain on the sidelines on Micron stock and see further downside pressure on the stock.
Notablecalls: Lousy call alert on MU. Hope you kept a tight stop.
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