Article published today about Sandisk and Micron:
seekingalpha.com
Pertinent excerpt:
Sandisk: up 62% in calendar 2013, and our biggest semiconductor weighting starting from mid-2012 forward, SNDK has benefited from both a weak yen, and strong megabit pricing driven by a dearth of supply from NAND manufacturers like Samsung ( OTC:SSNLF), etc. (Never owned Samsung). SNDK became an Apple ( AAPL) supplier after Q1 '12, which definitely helped drive the stock from its 2012 low under $35 in May - June '12 to today's high $60 price level.
Personally, I think the tailwinds are beginning to fade somewhat although EPS and revenue estimates continues to tick higher. We built a full 5% position in SNDK during the summer of 2012, sold half just prior to the July '13 earnings report, and then sold another 25% in early '14, leaving clients with a stub of a position as we enter into Q4 '13 earnings.
Readers have to understand that semis and the flash business is EXTREMELY cyclical as NAND capacity comes online very quickly and with little warning, resulting in EPS getting crushed substantially in a short period of time.
Here is our July '13 article on SNDK, which talks about the tough compares SNDK faces in the second half of '13, and here is our July '12 article on SNDK where we talk about how the stock's valuation in the low to mid $30's was too cheap.
Micron: If SNDK is cyclical, Micron is even more so as the DRAM and the NAND flash memory manufacturer is even more of a commodity play than the whole semi space, which is a commodity sector, but the Elpida acquisition, which puts MU firmly into the Mobile DRAM space, might be a game-changer for MU.
MU's November '13 quarter, which is scheduled for release next week, will be the first full quarter of Elpida's results included in MU's quarter. With the Street expecting $2.08 and $2.28 for fiscal years 2014 and 2015, MU's current p.e of 10(x) and 9(x) respectively is hardly expensive, but the growth of 10% expected in fiscal 2015 is nothing to write home about either.
Elpida, which was badly needed for MU given their Mobile DRAM presence, could make MU far less cyclical and thus far less volatile as a stock, but which also means MU could have far less upside potential in favorable DRAM pricing environments.
MU traded under $3 per share in 1990, soared to $94.50 in June, 2000 during the halcyon days of the PC and memory growth, and then collapsed in price, never to get close to those levels again.
MU could be an entirely different company now. Technically the breakout of the stock above the Sept '06 high of $18.65 is a positive sign. I don't think MU will repeat its 2013 1 year return of 250%, but a trade to $30 is certainly feasible if EPS continues to be revised higher.
Here is our last article on MU prior to the Sept. '13's quarterly earnings release.
UWG
ETA: FWIW, I am completely out of SNDK at the moment for the first time in many, many years. Looking for a re-entry point as a result of GS induced turmoil. |
