Just had a look at Micron for the first time in a while and was pretty shocked at how cheap the company looks right now. I'll give a quick summary of the fundamentals – please share your thoughts and let me know if there is something I'm not seeing to warrant such a low valuation.
Some key points/financials:
- $79B Market Cap.
- P/E of 8.9.
- P/S of 2.6.
- Earnings growth projected between 20-25% annually.
- Revenue growth projected between 15-20% annually.
- Debt to Equity of 12.7%.
- Extremely healthy balance sheet:
- $63.7B total assets, including $21.5B in short term assets.
- Cash & equivalents of $9.1B.
- Low total debt of $7.6B ($7.4B long term)
- Their short term asset balance more than covers total liabilities of $15.85B.
- Cash balance alone could pay off all short-term liabilities of $6.9B
- Have consistently improved profit margins over past 2 years.
- Benefitting from global chip shortage.
- Chip industry as a whole has good long term potential.
Some possible issues:
- From what I understand, Micron specialise in memory chips. Specifically NAND and DRAM. Meaning, revenue is not diversified at all unlike most other chipmakers.
- The chip market has so far been extremely cyclical which is why their revenue & profit has fluctuated significantly over the last decade. Although it's expected that the industry is going to stabilise as it continues to grow – fluctuations are still expected and can be unpredictable.
- Chip industry is very competitive and fast-moving; there is always a risk that companies like AMD, Intel, TSMC, Samsung, Nvidia etc. could take market share from Micron.
Hope people appreciate the DD. I am not that knowledgeable on the Chip industry in general so please share your thoughts and perspectives.
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