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

To: Carl Held who wrote (40831)	11/11/1998 4:05:00 PM
From: MR. PANAMA (I am a PLAYER)	Respond to of 53903

OKEE DOKEE Carl.....OKEE DOKEE....

To: Carl Held who wrote (40831)	11/11/1998 11:08:00 PM
From: Carl R.	Read Replies (1) \| Respond to of 53903

You said "Micron is no Intel". That is certainly an understatement. Intel could never survive in a bloody competitive field like DRAM. What's that? They tried it once and couldn't hack it, huh? <VBG> While we're at it, obviously Micron is no TI, either. <VVBG> Let's look at the comparative valuations of INTC. Intel is currently projected to make $3.92 in FY 1999, and MU as of a week ago was projected to lose $.16 in FY99. I don't have an estimate of INTC for 2000, but presumably it is around $4.50, while the estimate for MU is about $2. Based on the 1999 estimate it doesn't seem reasonable that MU is valued at about 40% of Intel, but if you have the vision to look a little further, the earnings for MU in 2000 are indeed about 40% of INTC, so the current valuation of MU is not really out of line. But it gets more interesting than that. Looking only at estimates made in the last month, the expectation is for a profit this year by MU. Clearly MU will beat estimates for Q1 99 where they were supposed to lose $.30, which will raise estimates for the year, probably to break even or a little better. Clearly the upwards trend in earnings estimates is stronger for MU. Then if you look a bit further into the future, it is not difficult to see MU making $5-6 a share in 2001. Of course you could also see a return to bloodletting and losses. But for now the market is looking at MU and seeing the world's largest DRAM maker. They are seeing a DRAM maker that is a generation ahead of the competition. They are seeing the world's low cost producer. As long as this is what they see, and as long as memory prices don't fall, this stock could easily hit 60 or more by year end. Is the current market valuation of MU realistic and based on fundamentals? In my opinion, yes it is. With the weak players kicked out of the market, strong Y2K hardware sales, and competitors tired of losing money at DRAM it is extremely likely that some semblance of order has returned to DRAM pricing, and that MU will begin to earn robust profits. So long as they are a generation ahead of the competition the chances are good that long before prices approach MU's cost, some competitors will reduce production. There are only a few things that will slow this freight train down. One is falling DRAM prices, which won't happen until mid December at the earliest, and in my opinion won't happen then. Another is mis-handling the TI acquisition - a distinct possibility in my opinion. The third is a collapse in PC sales, but since I expect strong sales, I consider this unlikely. Another possibility is that options expiration next week will probably slow the whole market down. Good luck with your shorts, but in my opinion, you'll need it, Carl