December 2017 Newsletter

Our End of Year Grand Slam in MU is BOOM!

Merry Christmas: Micron (MU) Patience Rewarded AGAIN...Now We Cash IN!

Bingo--our research was $2.50 a share in EPS and BOOM Micron once again delivered!
The upgrades from the WAY TOO pessimistic analysts will come over the next 2-3 days--and at $10 EPS and 7 FORWARD P/E Micron is a $70 stock.

At a more reasonable 8-10 P/E we have an $80-$100 valuation. FOR THE MOMENT I'm going to with a $75 target for 2018. 

Micron +3.1% after Q1 beats, upside EPS and NAND guidance

  • Micron Technology (NASDAQ:MU) shares are up 3.1% aftermarket following Q1 results that beat EPS and revenue estimates. Q2 guidance has revenue from $6.8B to $7.2B (consensus: $6.21B) and EPS from $2.51 to $2.65 (consensus: $2.03).
  • DRAM guidance: CY18 industry supply bit growth expected at about 20% and Micron expects FY18 to come in slightly below that figure (DRAM is PC memory and they sell this on annual contract basis to the big players)
  • NAND guidance: CY18 industry supply bit growth expected at about 50% and Micron expects to come in “somewhat above” the industry. 
  • BEAT ON ALL Key metrics: Gross margin, 55.1% (guidance: 50% to 54%); operating income, $3.09B (guidance: $2.65B to $2.85B); operating expenses, $650M (guidance $575M to $625M); cash and equivalents, $6.2B; current debt, $1.4B (AS WE FORECAST they paid off more than $4 billion in debt--interest debt service down 75% and really $5 billion when you do the math).
  • Press release  / Presentation slides 

We took $5k of profit from each of Micron positions on the $42.50 break--and bought a $5k position with January 5 2018 $50 calls at .75 or lower.

Action To Take: We should see these options trade higher tomorrow but let's wait for the target increases. $70 is the lowest and $90-$100 at the high end. IF there is no juice in the options by 12 noon EST I'll make a call and get it out. 

Shopify Options: HOLD...we still have $35k of profits on top of $32,000 we have taken off the table.  



Susquehanna (which is the best on the street besides ME on Micron) raised their price target on the stock to $60 from $54. My fave analyst Medhi Hosseini, wrote that "Micron's narrative is changing from a company with single-digit earnings power to one that could potentially do double digits ($10+) by the turn of the decade."

If you remember these charts...they are going to be increased.



And here is the average NAND chip spot price vs. the Micron stock price:


And finally, here is the DRAMeXchange DXI index vs. the Micron stock price:

- Toby

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Tobin Smith