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Technology Stocks : Semi Equipment Analysis

SOXX 299.67

+1.5%

Nov 12 4:00 PM EST

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Donald Wennerstrom

Sam

From: oldbeachlvr	6/19/2014 3:52:19 PM
	2 Recommendations Read Replies (1) of 95406

Mu earnings forecast received yesterday from Credit Suisse. Some repeat info from past. But predicts beat next Monday on revenue/eps and MISS on revenue/beat on eps next (4th) quarter. Micron Technology Inc. (MU) OUTPERFORM [V] J. Pitzer Micron Technology Inc. (MU) OUTPERFORM [V] J. Pitzer CP: US$ 32.25 TP: US$ 50 CAP: US$ 34519.7m Bottom Line. MU reports F3Q14 earnings on Monday Jun 23; hosting a cc at 4:30 pm EST. We expect MU to beat F3Q14 consensus revenue/EPS and extrapolating current pricing trends, we expect MU to MISS F4Q14 consensus revenue but BEAT consensus EPS on better GM and better equity income from Inotera. While a conservative guide could once again be a risk (MU has disappointed on guide for last 3 qtr while reporting a solid beat), we continue to argue that memory continues to be in the early stages of a structural renaissance driven by structurally slowing supply growth and structurally improving demand mix. Specifically our analysis suggests that bit supply growth in DRAM/NAND is decelerating from a 5Y average of 37%/72% to 29%/41% - an incremental bit/capex ratio of 3.5 in 2014 compares to the 5Y average of 6.0. Investors have been almost solely focused on supply fundamentals and continue to miss the most important INCREMENTAL driver of our bullish view on memory - ENTERPRISE DEMAND especially for DRAM. The last time Enterprise was an incremental demand driver for memory was 1994-95. If DRAM as a % of global GDP were to return to 1994-95 levels, we estimate that MU would earn $17/share. While we are not prepared to go there (yet), we see similar ecosystem dynamics around Big Data which is setting the foundation for significant upside to Enterprise DRAM demand. Specifically, MSFT is optimizing MySQL to access more DRAM, INTC recently tripled the amount of DRAM XEON can access from 4TB to 12TB, and both SAP and ORCL have introduced In-Memory Database tools architecture with an ABSURD amount of DRAM. If In-Memory were to grow to 4% of the server market, Enterprise as a % of DRAM demand would increase from 15% to 25-30% -more than supporting our view of $5 plus of sustainable EPS Please excuse any formatting problems--had problems copying.

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