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Technology Stocks : Semi Equipment Analysis

SOXX 314.52

-0.6%

Dec 11 4:00 PM EST

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seminole

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The Ox

To: seminole who wrote (86205)	1/7/2021 9:17:25 AM
From: Sam	3 Recommendations Read Replies (2) of 95572

No. Triple digits coming to a stock near you. Here is an excerpt from today's Merrill report on Micron ahead of earnings this afternoon: Top-5 reasons for PO lift; Samsung, execution, return, etc. We raise Micron’s PO to $105 from $85. We derive the new PO from 2.3x fair P/B based on FY22 BPS ($46), which is above both FY16-20 band (1-2x) and our earlier target of 2.0x. What led to the PO hike: (1) stronger DRAM spot price which leads contract price hike; (2) Samsung’s fabrication bottleneck using new nodes; (3) normal/tight inventories (among chipmakers, OEMs and even hyperscalers); (4) new chip order recovery (currently mobile/PC driven, but server from late-1Q); and (5) Micron’s good execution for 1znm/1anm DRAM and 176-layer NAND. We also assume lower stock beta (8.5% WACC vs 10.0% earlier) vs higher ROE (18% for FY22) – EVA and DCF valuation increase. We assume 10-14% higher DRAM ASP for FY22-23 (EPS revisions +18%/+26%) IMHO, more PO raises will be coming after they report this afternoon from other analysts. Of course, there is always the possibility that they will drop a turd this afternoon with their guidance for this quarter, but the odds of it seem low to me.

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