Micron Technology, Inc.

MU Details

Micron Technology, Inc. (NASDAQ: MU) provides memory and storage solutions. It offers a diverse spectrum of high-performance dynamic random-access memory (DRAM), negative-AND (NAND), three-dimensional (3D) XPoint memory, and NOR through its Micron and Crucial brands. MU manufactures its products in Taiwan, Singapore, Japan, the United States, Malaysia, and China, handled by subcontractors. As of December 09, 2021, the company's market capitalization stood at USD 96.36 billion.

Latest News:

• Opening Memory Design Center in Atlanta: On December 06, 2021, MU stated it plans to open a new memory design centre in Midtown Atlanta, further expanding its reach in the Southeast. MU will expand its access to Atlanta's vast pool of technical talent by opening a new campus in January 2022, allowing it to further improve its memory design and engineering leadership.
• Augmenting Partnership with UMC: On December 01, 2021, MU extended its business relationship with United Microelectronics Corporation (UMC), a Taiwan-based semiconductor company, to ensure future supply for automotive, mobile, and critical customers. This collaboration enables MU to strengthen its clients' supply chains and provides an opportunity for the semiconductor industry for further cooperation.

FY21 Results:

• Double-Digit Growth in Topline: MU reported YoY growth of 29.25% to USD 27.71 billion in FY21 (ended September 02, 2021) compared to USD 21.44 billion in FY20 (ended September 03, 2020), attributable to higher DRAM and NAND sales.
• Surge in Net Income: MU's net income increased significantly from USD 2.69 billion in FY20 to USD 5.86 billion in FY21.
• Strong Balance Sheet: It has USD 8.63 billion in cash and cash equivalents (including short term investments) as of September 02, 2021, with a total debt of USD 6.78 billion.

Key Risks:

• Customer Concentration Risk: WPG Holdings Limited represented 13% of MU's FY21 revenue. Similarly, Kingston Technology Company, Inc. accounted for 11% of the company's sales in FY20. Over-reliance on a limited number of customers could adversely impact its operational performance in the long run.

Outlook:

• Q1FY22 Estimates: As of Q4FY21, MU expects to clock revenue of USD 7.65 billion (+/- USD 200 million), along with a GAAP gross margin of approximately 47% (+/- 1%).
• Expense Estimates: MU further expects to incur non-GAAP operating expenses of ~USD 915 million (+/- USD 25 million).
• EPS Estimate: In Q1FY22, MU estimates an EPS of USD 2.00 (+/- USD 0.10) and USD 2.10 (+/- USD 0.10) on a GAAP and non-GAAP basis, respectively.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MU Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

MU's share price has increased 18.93% in the past twelve months and is currently trading close to the mid-point of its 52-week range of USD 65.67 to USD 96.96. The stock is trading above its 50 and 200 DMA levels, and its RSI Index is at 61.68. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 79.72.

Considering the uptick in the stock price and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 84.93, down 1.27% as of December 09, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.