You could be describing Micron
Yes, but Micron has a history of being a memory stock. They have trading patterns, which involved Samsung adding 3xs their necessary capacity, and ruining the memory industry for a while until demand catches up to capacity. Although DRAM is down to 3 majors, NAND has 6-7 players, and there's no reason to really believe Samsung will behave differently. Perhaps Samsung will ruin memory for a while, perhaps not, but that possibility is (I think) what keep MU's "peak cycle" multiple low.
SIMO is a semiconductor maker. But...it doesn't really trade with the semi group cycle. Fundamentally it has it's own drivers - increase units of devices which use a NAND chip. And, within that area, SIMO has gained tremendous share in SSDs, which SHOULD reduce competition and long term increase SIMO's gross margins. That possibility combined with SIMO's phenomenal three year revenue growth SHOULD deliver something like at least a 15x PE to the stock, but no. And if phenomenal revenue growth, market share gains and being in a stable industry segment with minimal competition doesn't increase the PE, well, what will?
And if the PE is always going to be 8x, you know, why bother owning SIMO rather than a well positioned blue chip?
If capital gains taxes were not an issue I would gladly sell all my SIMO to buy well positioned tech blue chips.
And in the "market is efficient pricing in the future growth prospects of a company", SIMO proves that that is ABSOLUTELY not true. In 2019 SIMO was on the verge of 30%+ revenue growth and 40%+ EPS growth for the next three years, and it traded at 10x NTM EPS. Why? The market didn't forecast the outlook properly, or more likely SIMO has no US instiutional investor base that will give it the valuation given to go go semiconductor stocks.
I really don't see why MRVL with a 40x NTM EPS PE doesn't buy SIMO for 20x using their stock. Everyone wins, and it removes the upcoming competitive threat to MRVL's enterprise flash controller business. SIMO entered the client flash controller business (where MRVL was the leader) in 2015, and in 2019 MRVL exited the client business because they couldn't compete with SIMO on tech and price. Based on that history it's likely that SIMO just gobbles up most of MRVL's enterprise flash controller business when SIMO releases it's first state of the art enterprise SSD controller in 2023. Why try to compete when MRVL could easily buy SIMO today and it would be accretive to MRVL's EPS? This is the most obvious acquisition win win I can recall ever seeing.......that it doesn't happen perplexes me.
I want MRVL to put me out of my SIMO misery.... |
