Kerry, this is lengthy, and important to me, because this is the weekend to really evaluate
MU for possible price movement for the coming 4-5 weeks, just prior to the earnings, and
I want to make big bucks on it.
However, to answer your question, I personally would not hold puts beyond Dec 31st, or
Jan 2nd, depending on your tax position, just in case there is a tech Jan rally.
I have questions about the following, which is covered in detail later:
1. The erroneous earnings data on MU in databases used by the market
2. Estimated earnings for the report this week (Monday PM?-normally about 5:30eastern)
3. The stock is at the low for the year. Will investors sell to take losses?
4. What price will the stock have support?
5. What is a fair PE for MU?
6. Changes in the world market and the impact on MU.
The above questions in detail:
1. The erroneous earnings data on MU in databases used by the market
The databases with MU earnings indicate $1.53 for the past 4 qtrs and giving the stock a
PE of only 14.7. One link indicating $1.54, and est. qtr as .30, yr as $1.24 and next year
as $2.09. The true operating net is $1.03 if extraordinary income is excluded.
dailystocks.net
The following Zacks link is showing Primary EPS BNRI as $1.03, and Primary Net as
$1.53, and is the only place I found showing the true $1.03.
ultra.zacks.com
2. Estimated earnings
First, income from MUEI will probably be zero. Last qtr, MUEI contributed $.04 to the
$.33 reported MU income. If you wish to read about the MUEI warning the link is:
biz.yahoo.com
The link from dailystocks.com indicated $.30
The following link for Zacks estimates $.18 for qtr, $1.18 for yr, and $2 for next yr.
ultra.zacks.com
Post from Mile Iles 11-26, quoting analysts meeting: Q1 report to be 12-16
John Lazlo of Paine Webber cut his estimate for Q1 from .13 to .04
Message 2822063
Post from Mile Iles 12-9, quoting Dan Niles earnings reduction from .39 to .14 to .06
within several weeks. Also cut yr from $2.60 to $1.10 to $.10, and next qtr as -$.10.
Message 2915218
3. The stock is at the low for the year. Will investors sell to take losses?
My first thought was if investors had good profits from the year, and they should, they
would sell MU to write off the losses for taxes. I checked the past 12 years on MU charts
and found that 1989 was very similar to 1997. At this point in the year, every person
buying the stock during the year in 89 and this year,had a loss. In 1989, the stock did not
go down in the last two weeks, however it did during the first 3 weeks of 1990.
The other question is, "will funds dump MU to get it off of the books for their year end
reports?" Again, in 1989, they apparently didn't.
4. What price will the stock have support?
Support should be expected at the previous low of 22 1/16, but there was not a lot of
volume at that low. However, assuming MU goes through the 22 level, expect serious
support below 20. In the 13 day period of 7-16-96 and 8-01-96, about 66 million shares
traded between the low of 16.63 and 20. But that was 17 months ago. Maybe all of those
trades have gotten out of them by now. Who knows?
5. What is a fair PE for MU?
As mentioned above, the market databases have a bad PE of 14.7 because it is using the
$1.53 yr earnings when it should be $1.03.
When MU hit 94.75 on 9-12-95, the trailing 4 qtr earnings was $3.93 and PE was 24.
Earnings a week later boosted the trailing 4 qtr earnings to $4.61, and with the stock at
86, gave it a PE of 18.7
With a fantastic earnings report Dec 14, 95. the trailing 4 qtr earnings jumped to $5.26.
However, the stock dropped 10 points in several days from 55 to 45. The PE at 45 was
only 8.6. Looks good to me. But, as Larry always says, the stock is trading on earnings in
six months, and the earnings was expected to start slowing. If that is true for the present,
and earnings is expected at less than 10 cents, and Dan Niles now calling for only 10
cents for the coming year, what is the stock doing at 22.5!!!!
6. Changes in the world market and the impact on MU.
Last August, I called for a calendar 4th qtr low of 21.9, and a rebound to about 50 in late
March, based on historical MU patterns. All bets are off, because of this Asian stuff. In
one week, Korean chips are 50% cheaper than Micron's because of the won-dollar. If I
owned an assembly plant, I would buy my chips from overseas because of the dollar's
buying power of imports. One company to benefit from this, is DELL, as spoken by
Michael Dell, himself, on CNBC about a week ago.
Conclusion: MU reports are written in such a manner that it is almost impossibe to make
earnings estimates. Last qtr was $.29 without MUEI input. Avg selling price for memory
products declined 13% from previous qtr, causing gross margins to decline for 49% to
44%. Shooting from the hip, let's say that for this qtr, selling price declined 26%, (2x last
qtr decline) causing gross margins to drop to 34%, I will guess earnings to be about $.13.
If the street is looking for $.18 and it comes in $.05 short of that, the market will not be
kind, and two analysts mentioned above, already expect less than that.
If MU doesn't get its act together and transition to 64 from 16 in a hurry, thus increasing
megabit production by a factor of 4, they are hurtin! I will be riding MU down to the
teens, then I am probably shift away from MU to other stocks. Hate to do that with the
100's of hours in research on MU.
DavidG, rethink this upside scenario that you mentioned. I'm backing off from it.
MU is a sick puppy. Maybe sell Lehi and/or Micron to someone like IBM?
Just food for thought for everyone to consider before the earnings report.
And don't give me much flack. I've got a thin skin.
Patrick
PS: I'm too lazy to rearrange the type from my cut and paste. |
