Here are details of the upgrade on MU from Bear Stearns today:
Key Points
*** Recent checks with DRAM industry sources indicate that inventories,
which have risen since the fourth quarter of last year, are starting to
decline. Insufficient DRAM capital spending during the last few years will
likely cause worsening DRAM supply shortages later in 2000. We are raising
our EPS estimates for Micron and upgrading our rating to Buy in anticipation
of this. We are boosting our 12-month target price to $225.
*** Strengthening corporate PC demand, the initial deployment of Windows
2000, and weak DRAM prices have caused the average memory configuration per
PC to begin climbing, a trend we expect to continue. DRAM bit growth should
accelerate during the remainder of 2000, causing ASPs to rise and leading to
stronger revenue and earnings growth for Micron.
*** Rapid growth in microprocessor clock speeds will place a stronger
emphasis on high speed DRAM solutions, whether DRDRAM, DDR DRAM, or SDRAM at
higher clock speeds. This should lead to improving overall ASPs,
particularly for Micron which tends to shift quickly to new DRAM
implementations.
*** Attenuated DRAM capital spending over the last few years and a delayed
recovery in new DRAM capital spending is likely to cause serious supply
shortages later in 2000, which could persist into 2001. Furthermore, the
consolidation in the DRAM business could cause supply tightness to last
longer than in previous cycles, which would positively affect Micron's
financial performance.
*** Micron is in excellent shape with an aggressive process roadmap and
industry-leading low cost performance. Although recent price declines should
negatively affect earnings in the current quarter, we expect prices to
turnaround earlier than the last few years due to very tight capacity
utilization. We consequently believe that Micron could generate enormous
revenue and earnings growth later in 2000 and in 2001. We are upgrading the
stock to Buy from Neutral and raising our 12-month target price to $225. |
