Recommendation:
Our client should purchase Micron Technologies (MU) because it is undervalued. It has 3 key strengths which are its global manufacturing capability, investment in research/unique products, and oligopolistic position in the chips market.
Country, Sector, Thematic Weights and Key Financials
Country/Sector Intersections:
- Country: US
- Sector: Technology, Products examples: Dynamic random-access memory (DRAM)
Global Industry/sub Industry: Initial Comparable Companies
- Agilent Technologies, Cypress Semiconductor, Integrated Device Technology, Samsung Electronics, Xlinx
Capitalization/valuation targets:
- Key Financials (from Bloomberg)
- Share Price: $33 per share
- Current EPS: 2.7733
- Estimated EPS: 3.6180
- Market Cap in USD Millions: $35,434.75
Strategic Attribute Identification
Increased Market Share: Applications that require memory storage continue growing so demand is projected to increase. There are also diversification opportunities because memory chips can produce different products for enterprise, networking, mobile, automotive, and gaming.
New Lines of Revenue Growth: New revenue opportunities such as 3D NAND and server DRAMs will help Micron increase profitability
Size: Micron Technologies has a oligopolistic position in the chips market
Strategic Attribute Preferences
Micron is a large global company that is in line with our view of preferring companies with “a large client base, broad geographic presence, and scale who can act quickly as capital markets expand (Source: Representative Stock Selection)”
Strategic Attribution Execution Analysis
The company is continuously looking to expand market share:
1. Acquisition of Elpida and the
2. Launch of an SSD product into a growing SSD market
Relative Valuation Analysis
Micron has a return on equity and total assets that beats its competitors.Micron Technology reported revenues at $4.32 billion for the quarter; 6%, higher relative to the third quarter of FY2014 and 49% higher than those compared to Q4 2013, beating analyst expectations suggests the company is outperforming expectationsMicron is creating out a niche by making specialized chips, meaning it can charge higher margins
Risk Assessment
Companies in the semi-conductor/chip manufacturing businesses have high fixed costs relative to variable costs, the current good performance of the US economy suggests that Micron would benefit favorably from the economic climate
- Gugnir and Partners
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