I am starting to analyze MU, and I think it looks better as a short than a long, but I have just begun the research process:
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China wants to quickly ramp up its own memory chip industry, and is going to invest around $150B to do so. nearly half of MU's sales are to China.
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DRAM is a commodity. In order to keep and grow market share, you have to expand capacity and grow production. Obviously that is bad for the price of DRAM. So far, Samsung and SK Hynix have been aggressive in expanding capacity (Samsung grew capex 77% in 2017; SK Hynix grew capex 53% in 2017...and MU's capex spend DECLINED by nearly 19%. MU might need to play catch-up.
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Capex to sales for the major DRAM manufacturers is well over the 20% mark, which is generally indicative of a potential for oversupply in the future (according to an industry primer).
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A lot of people love MU right now, because supply is tight and DRAM prices have been on a tear. But on the flip side, higher DRAM prices means the end consumer suffers. Apple recently put a cap on iPhone memory BECAUSE prices for DRAM have gotten very expensive; the Chinese government is upset over high DRAM prices and is pressuring manufacturers to lower DRAM prices; discussion on various forums seems to imply that more people are deferring PC upgrades due to high DRAM prices. And it's been reported that data centers seem to be facing some margin pressure given the higher input costs.
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DRAM prices, while still growing, are growing a lot less quickly than last year.
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Sales' growth acceleration has been declining.
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A lot of "value investors" tend to think of MU as a value stock, given its low earnings' multiple. But typically you want to sell cyclical stocks when the multiples are low, and go long when multiples contract.
burrym, hey, look at the bright side, at least you didn't get a ton of monkey shit thrown at you...here is my best guess on threads that might be helpful:
If we're lucky, maybe I can guilt some users to help you out: iggy402 pdres25 45WallSt
I hope those threads give you a bit more insight.
7 is the bane of all value investors. I think it might be more of a novice value investor play. Professionals should know to look at a lot more than P/E ratios and like you said understand pricing cycles.
Personally I’m a bit bearish all of those chip makers. If Nvda falls because crypto falls (debatable how much of their growth is crypto chips) then the whole chip space likely repriced.
Is it undervalued or are earnings projections too high? That's what you need to think about. Review DRAM and NAND - NAND is doing too well.
In this space, I like NVDA and TXN the most
I haven't looked closely at NAND because it's only around 30% of MU's sales (but things can change very rapidly in the semi industry, so I probably should). I believe DRAM will drive the narrative surrounding MU, and a couple days ago a lawsuit was filed against the 3 main DRAM manufacturers (SK Hynix, Micron, and Samsung). The suit accuses the manufacturers of artificially raising the price of DRAM. If this case has merit, the recent driver of strong revenue and earnings' growth does not seem sustainable.
Interestingly, Samsung and SK Hynix (and MU, to a lesser extent), got in trouble for the same thing in 2006. Executives went to jail in that case. https://appleinsider.com/articles/18/04/27/samsung-micron-hynix-alleged…
UPDATE: closed my put options for an 82% return. This was a relatively large position, so I felt it was prudent to take risk off the table. Although I'm very skeptical of the bull thesis, I believe my edge has diminished somewhat as sell-side cheerleaders have recently gotten on the bearish bandwagon.
what do you think of avgo? Trying to pitch this and need some help understanding the chip sector
I'm a generalist, so I can't add much value with regards to AVGO, but here's a primer: http://www.semismatter.com/wp-content/uploads/2014/11/IndTech_rpt_14111…
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