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Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (52435)	4/5/2001 9:25:04 PM
From: Rutgers	Read Replies (1) \| Respond to of 53903

Zeev, this week both the NY Times and Barron's killed MU.. not to mention that our good friends at ML downgraded it today and BOA issued a negative report on the Semis. So, if this stock heads significantly over $40 in the face of mainstream financial journalism at its best, I think the overall stock market is in worse shape than I think it is now. Before I give you a few of the highlights from this week's stories, do you know what the forward P/E is for this one? We won't even discuss growth because this thing doesn't currently have any. Now, to be fair, it is in a cyclical industry which means there will be ups and there will be downs. Furthermore, their products are commodities which is a good segue to discuss their P/E. Here it goes: On Friday, March 30, I read the following estimates for fiscal '01: $0.50 (Lehman Brothers); $0.47 (Banc of America); and $0.33 (Credit Suisse First Boston). So, at $40/share what forward P/E do you come up with? I get the following: 80 for Lehman; 85 for BOA; and 121 using CSFB's numbers. Okay, now to the articles from the NYT and Barron's. First, Barron's wrote an excellent follow-up piece (See page MW5, Barron's dated April 2, 2001) to last week's skeptical piece from last week. The gist of this week's attack, er, article, is that MU's stock price ran up after the preliminary report cc on March 21 because the company stated that DRAM inventories at PC makers had "corrected" in the February Q. Fast forward to this past week's cc, out of the blue, Micron's freshly minted balance sheet showed that inventories had soared approx. $100 million to $1.1 Billion in the Q while sales plunged to $1 Billion from $2.6 Billion in the year-earlier period. Apparently some analysts were looking for an inventory decline. Obviously, not only didn't the inventory decline, it got bigger, much bigger! Second, highlights from the NY Times: ==> Mkt cap exceeds $24 billion. Its shares trade at a stunning 5.6 times sales, if you extrapolate out from its second-quarter results. ==> In 1998, Micron lost money and its shares traded at roughly 1.3 times its sales. And in 1992, when the company broke even, the stock traded at a price equal to its sales. ==> Inventories stood at $1.1 billion in the most recent quarter, up from $690 million last August. ==> Conclusion: Micron may not have much of a business these days. But its stubbornly loyal investors are making sure that it remains one hell of a stock. Imo, the most noteworthy difference between this article and the Barron's articles is the historical references to past Price/Sales multiples. As can be seen above, Micron's current P/S multiple is way out of whack with its historical average. In short (a little pun intended), as documented in the NY Times piece, only those who willing to make a historically huge bet should purchase MU on the long side, imo, bwdik, etc.