The holidays have not been kind to Micron (MU). The batch has been downgraded and a batch cost has declined. From Dec 20, 2013 to Jan 3, 2014 a batch cost has declined $1.20 or a small over 5%. So, a finish of a universe is not utterly here yet.
There seems to be some hanky-panky with a up/downgrades. Seeking Alpha contributor, ElectricPhred posted this link to a CS (Credit Suisse) Micron news antiquated 1/3/2014. Rated outperform (buy), $.60/share gain estimate, $25 cost target.
On a other palm we have an article by WKRB that claims CS downgraded Micron from outperform to marketplace perform on 1/3/2014. Now that usually can’t be true. The essay is a outline of downgrades of Micron. It creates we consternation about a ground and clients of WKRB.
The “consensus” of 29 analysts for Micron initial entertain earnings, according to Yahoo, is now $.43. The operation of Micron gain among there 29 analysts is $.18 to $.72. So, there unequivocally is no consensus, usually an average. we theory some of a analysts are capricious about Micron or have another bulletin or master.
Some of this doubt comes from either a researcher believes, “this time is different” in a memory business or, “This time is not different”.
I have offering my opinion on because we consider this time is opposite in a Seeking Alpha article a month ago and that opinion is still valid. A unequivocally brief outline is: Nation-states are now out of a business, a serious cycles were when there was usually DRAM. Now NAND is a large factor, shortly to turn a biggest factor. The PC marketplace used to be a solitary marketplace for a solitary product, DRAM. Now we have DRAM and NAND. Mobile inclination now use some-more DRAM than PCs. NAND is used in mobile, toys and trinkets, and a shortly to raze plain state expostulate business.
For some analysts it is tough to consider about a “new” memory business.
Let’s dismantle Micron and try to come to some theory of gain for a initial entertain due to be reported on Jan 7, 2014.
We can go all a approach behind to a pro-forma earnings statement of Feb 5, 2013. On page 72 of a PDF chronicle we can see a cost of products sole for Elpida and Micron of a time. After a pro-forma adjustments for Elpida (basically holding debasement out of a cost) we have a cost per wafer (assuming 540,000 wafers per quarter) of $1075 per wafer. These are all DRAM wafers, maybe half mobile DRAM and half PC DRAM. The 540,000 wafer represents about 1.5 billion 4Gb chip equivalents. If Apple (AAPL) bought all their mandate of mobile DRAM from Elpida it would have been about 400 million chips or reduction than 30% of a Elpida output. These chips were sole in wafer form and, therefore, were utterly cheap. Figure about $3 per chip or $2100 per wafer. The other wafers substantially generated about $4 per chip or $2800 per wafer. A reasonable normal wafer cost for Elpida for a initial entertain is substantially about $2450. So, Elpida income should be about $1.3 billion. Cost should be $580 million or 55% sum margin. The Elpida op ex and seductiveness totaled about $165 million in a pro-forma quarter. We can assume that is adult some, so let’s try $225 million. We have $720 million sum distinction reduction $225 million op ex is $495 million handling profit. Figure sustenance for Income taxes during 30% and we come adult with $347 million net profit.
The same pro-forma puts a micron wafer cost during about $1500. Micron didn’t have a unclothed wafer low prices of Elpida, so it would be reasonable to assume that a 1.08 million Micron wafers brought about $2800 per wafer income or a small over $3 billion revenue, and about $1.4 billion sum profit. The pro-forma op-ex and seductiveness for Micron was about $430 million, though we can make that $500 million for a initial quarter. That give $900 million handling gain for a Micron part, 30% sustenance for taxes and we get $630 million for net profit.
Combined, we get $977 million in net profit. Divided by 1.05 billion shares and we have…drum roll, please, $.93 per share on Tuesday night.
Now everybody reading this knows that we am an unreformed optimist, so cut it behind by any commission that we hold appropriate. Am we 80% right? That would be $.74 per share. That’s removing flattering tighten to a high researcher theory of $.72 per share.
Combined income for a entertain would be about $4.3 billion, that sounds a small high until we remember that Micron boss Mark Adams indicated that a total association would have a $16 billion annual “clip” about 10 months ago….before a full DRAM cost increases were in place.
We know that a furious label is Micron management. They can screw adult a dual automobile march and censor gain unequivocally effectively, though it is unequivocally tough for me to see anything though a large blowout on gain subsequent week.
Disclosure: I am prolonged MU. I wrote this essay myself, and it expresses my possess opinions. we am not receiving remuneration for it (other than from Seeking Alpha). we have no business attribute with any association whose batch is mentioned in this article.
Article source: http://seekingalpha.com/article/1929061-Micron-Are-The-Analysts-Getting-Cold-Feet?source=google_news
