Here is some more from the Prudential analysis:
February Quarter Update. Micron reported its February quarter results yesterday after the close, with revenues coming in at $645.9 million, up 52.4% QoQ, lower than our $750 million estimate. EPS came in at $(0.05), beating our estimate of $(0.12) but a penny light of FC consensus of $(0.04). We had assumed that the company would have been able to ramp production more aggressively as improved demand and pricing shaped up in the quarter. However, bit shipments actually declined around 10% QoQ (production bit growth declined 30% in the quarter) due in part to line thinning actions taken last fall which impeded the company’s ability to quickly benefit from the improved demand picture. COGS in the quarter reflected a $260 million benefit from the sell through of previously written down inventory and the company took a $4 million charge to write down some flash memory. Going forward, the company has around $160million of this inventory benefit left, of which half is expected to be recognized in the
May quarter. Operating expenses came in at $215 million, in-line with our expectation of $211 million.
Miscellaneous Areas. The company indicated that they’re starting to see signs in the wireless and wireline communications end markets. Flash and SRAM continue to be less than 10% of wafer starts. Company has not announced its 300 mm timeline yet and wouldn’t expect them to do so at least until there is some resolution with the potential Hynix deal. Micron is aggressively ramping DDR memory and 256Mb with DDR currently representing 25-30% of production with bit cross-over expected over the next couple of quarters. In terms of production by densities, 64Mb is in the single digits, 128Mb accounts for around 40% and 256Mb accounts for the balance.
So from this paragraph I read that dram is the major source for MU income (flash and sram being only 10% of wafer starts). No wonder that MU got hit so sharply in the downturn and conversely they might profit most from an upturn.
Balance Sheet. Micron ended the February quarter with $1.48B in cash and short term investments,
down $250.7 million from the previous quarter. Inventories increased slightly by $96.6 million to $547.6 million reflecting previously low inventory levels as a result of write-downs. As such, inventory-dayson- hand increased to 98 days from 64 days. We do not view this as concerning given what appear to be relatively low inventory levels through the channel and the healthy level of demand that seems to be continuing. Receivable days inched up to 65 days from 63 days. Capital spending in the quarter came in around $150 million and depreciation in the quarter was $291. The company’s CapEx guidance for the rest of the fiscal year is around $1 billion and depreciation of around $1.2 billion. Micron mentioned that its thought for CapEx for FY03 is around $1 billion as well, excluding any impact from its Dominion acquisition, any potential Hynix deal, or a 300mm production ramp.
Estimate Revision We are revising our May quarter revenue and EPS estimate to $1.05 billion and $0.07, up from $800 million and $(0.10). Our FY03 revenue and EPS estimates go to $3.4 billion and $(0.23) from $2.8 billion and $(0.70). We are also taking up our FY04 revenue and EPS estimates to $8.5 billion and $3.30, from $8 billion and $2.85.
We are also raising our price target to $55 from $50 based on a 20 times multiple (the company’s long term growth rate) applied to our cal03 EPS estimate of $2.86. Our price target also reflects around a 5 times book value, which is where the stock has historically traded in the early stages of an upcycle. Near the peak, the stock has traded around 10 times book value. We think this is quite reasonable, and perhaps even conservative. We continue to view Micron as one of our favorite cycle plays. Reiterate Buy rating.
Cheers
Cor |
