Micron Stock Prediction

Summary

• The release of Micron 3D NAND Flash driver could become pivotal in locking-in their customers
• There is still hope for the Tsinghua Unigroup acquisition deal.
• Many Investment gurus have bought a large amount of Micron’s shares
• According to analyst data, the company’s stock is undervalued.
• I Know First Algorithm is bullish over MU over the long term, believing it is a wroth while stock to invest in.

Micron – MU- is a global leader in the semiconductor industry. They provide memory storage which can be found in many of today’s PC computers, and produces CMOS sensors which are used to produce images for camera.

Mark Durcan has been the chief executive officer at Micron Technology since 2012 and has high hopes for the future. I do believe that, due to the reasons stated in this article, MU will be a significant addition boosting one’s portfolio.

Micron is currently trading at 17.39$ at the time of writing.

Micron is a big players in the NAND market and accounts for 14% of the market. The company boasts an impressive $3.045 billion in revenue as of 2014 but the decline in the conventional PC market has led to shares of Micron dropping dramatically. As well as the apparent buy out speculation by Tsinghua Unigroup which has put Micron on the ropes.

3D NAND Flash memory

Micron, who are currently listed on the S&P 500, have always had an interest in Intel, in fact the Micron-Intel partnership dates back to 2006 when the two partner up to create the NAND Flash drive, the drive which is commonly used in smartphones and tablets. The relationship developed even more so in 2012 when Intel agreed that Micron is to supply them NAND products, in return a joint venture assets to be sold to Micron. The two’s current joint venture is to produce a 3D NAND drive, which is expected to be an important growth factor in the NAND market.  The company is fourth in ranking of the NAND Flash market behind the likes of Samsung and Toshiba and I believe that entry into the 3D NAND market could be pivotal in increasing Micron market share in the long run.

Together with Intel, Micron announced its 3D NAND technology in March

The 3D NAND is a type of flash memory that has a denser chip processor and has twice the speed performance and 10 times the reliability of the previous NAND. The 3D NAND has overcome what was a concerning issues with the current 2D NAND, this being the density limit.

It is likely that many NAND users will not switch to the 3D NAND straight away as the technology is still in the testing and sampling phase. It is though that the 3D NAND technology will be in high demand come 2017 with Forbes estimating the good will account for 65.7% of the total flash shipments.

According to the company website “samples of our 3D NAND will be available in 3Q15 with full production beginning in 4Q15.”  Micron, is expected to release a number of 3D NAND, the 1st generation 3D NAND is on track for production in Singapore, while the second generation is under development in Boise. The first drives will likely have capacities in the range of several terabytes and be targeted at enterprise buyers. It is thought the drivers will be charged at a premium in the short run yet, with a smaller more affordable version likely to be released in the long run which will attract laptop and tablet manufactures.

By the American company penetrating the 3D NAND market at an early stage the company can start building a strong market presence in the field. Furthermore, Micron can lock in their costumers now and, given that the switching cost of such a driver is expensive, can build a strong loyal clientele.

It is important to note that Microns main competition, Samsung, is already mass producing their own 3D NAND, named 3D V-NAND. However, neither SanDisk nor Toshiba will release their own version in the foreseeable future, thus giving Micron a competitive edge. Moreover, Micron could be pressured should Intel abort its partnership with Micron and opt to manufacture its own NAND and 3D XPoint chips.

One should acknowledge that two thirds of Microns revenue base come from DRAM accounts, and with the decline in PC shipments many are sceptical that Micron’s upcoming 3D NAND can compensate for this loss. However, CEO Durcan is well aware of the situation saying “It really caught a number of us by surprise, but it’s not a cataclysmic cycle,” he said. Despite the PC slowdown, Micron is forecasting 25% growth for its DRAM business in 2015 and 24% in 2016.

CEO D. Mark Durcan addresses his employee at an annual Micron event

The Tsinghua Unigroup and Micron Saga

Those of you in the know have probably heard about the on and off saga of China’s Tsinghua Unigroup and Micron Technology acquisition. The deal was first reported a couple of months ago and was said to be worth $23 billion. Although, Unigroup have not released any official statement which completely puts a decisive end to the discussion, Doug Young a Forbes Asia correspondent, says the future does not look promising.

The deal was set to be the biggest-ever acquisition of a U.S. company by a Chinese counterpart. However, political difficulties surfaced as Micron’s status as the biggest U.S. maker of memory chips for electrical devices and Micron being a major supplier to the US defence industry, were not well accepted by the Chinese business.

The latest information about the clandestine deal were based on information from a second-hand source familiar with Unigroup Chairman Zhao Weiguo’s recent U.S. trip.

Young cites Zhao saying that ideally Unigroup can still close a deal to buy Micron. However, Zhao quickly adds that if such a deal doesn’t happen, perhaps the two companies can form a deep cooperative arrangement that will benefit both sides, which will help forge a new kind of relationship between Chinese and U.S.technology companies. The report adds that Zhao also met with several U.S. legislators on the trip, though it didn’t plough into the matter.

Unigroup has high hopes in becoming an information technology giant that could someday compete globally with the likes of IBM. This is highlighted with Unigroup signing a major equity tie-ups with U.S. tech giants Intel and Hewlett-Packard over the last 2 years. As chairman of China’s Tsinghua Unigroup visited the U.S. in July with expectation to close the agreement, speculation of the acquisition grew, thus boasting Microns shares by 1.85% to $15.96. However, the $23 billion offer was later rejected by Micron.  Micron reasoning being that the sum was too small and suggesting that the acquisition will harm them in navigating the company into a bright future.

It is thought that due to the upcoming election in the United States, the deal with the Chinese company broke down. This is because China is often an easy target for candidates to attack during that period. The election year politics responsible for the deals setback, means that the agreement could only be revived come sometime next year. Xu Jinhong, chairman of Unigroup’s parent company Tsinghua Holdings, helps reinforce this, he told Reuters that Tsinghua had not given up, saying he hoped the deal “could eventually come through“.

Share prices of Micron decreased by 11.3% in August, and in my opinion, are undervalued. If the market reacts similarly to the way it did so in July when speculation of the Micron- Unigorup takeover were simmering, then Micron low stock prices are ones worth buying now and longing in order to obtain premium returns.

Follow the leader

David Einhorn, an American hedge fund manager, is the founder and president of Greenlight Capital, who holds 37.95 million shares of Micron, he recently upped his stake by 14% on the quarter a couple of weeks back. This bullish move by Einhorn shows that he has faith in the company and sees potential stock price boom in the upcoming future. Likewise, Pzena Investment Management’s Joel Greenblatt  and Jean-Marie Eveillard of First Eagle Investment upped their stack by 89.80% and by 29.95% respectively. Although, the famous phrase ‘don’t be a follower, be a leader’ is one which many educate their peers on, it may not be so true in the financial field.

Valuation

If we look at the valuation of MU we see the stock is undervalued, the stock sells at price per earnings ratio of 4.85x, which is at a discount when comparing the industry average of 16.80x. To further cement this issue we can look at the price-to-book ratio of 1.26x which again indicates a discount versus the industry average of 1.36x. In light of this data many analysts consider it is the right moment to buy Micron because of its attractive relative valuation. Even more promising is the news that  MKM Partners upgraded Micron from “neutral” to “buy” with price target of $23 up by 1$ from their last estimation. MKM Partners’ target price points to a potential upside of 36.74% from the company’s previous close. On the earnings front, MKM sees Micron benefitting from an improved cost picture as output of 20-nanometer chips increase.

MKM Partners upgraded Micron to “buy”

Micron Stock Prediction:  An Algorithmic Forecast (MU)

I Know First’s algorithmic analysis  mirrors the bullish stance that the company is showing.  The indicators throughout this article suggest that Micron will be of long term value in the future, and is a stock investors should consider purchasing.

I Know First supplies financial services, mainly through stock forecasts via their predictive algorithm. The algorithm incorporates a 15-year database, and utilizes it to predict the flow of money across 2000 markets. The self-learning algorithm uses artificial intelligence, predictive models based on artificial neural networks, and genetic algorithms to predict money movements within various markets.

The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions. The middle number is indicative of strength and direction, not a price target. The bottom number, the predictability, signifies a confidence level.

I Know First published a bullish forecast on Micron, an American semiconductor. Having explained how I Know First’s algorithm works, it is worthwhile to see if the algorithm agrees with the bullish fundamental analysis of the company. The three-month and one-year forecasts for Micron are included.

Micron is among the top stock picks for both time horizons. The stock has a strong, bullish signal for both, indicating that the stock is currently very undervalued. Over the predicted time horizons, the stock is currently undervalued, which is in support of the fundamental analysis. The company’s planned 3D NAND driver release as well as its planned merger with Unigroup, helps cement a promising future.

Positive signal strength does not mean investors should automatically buy the stock. Dr. Roitman, who created the algorithm, created rules for entry for a stock such as Micron. Using this trading strategy, an investor should buy a stock if the last 5 signal strength’s average is positive and if the last closing price is above the 5-day moving average price. When both of these conditions are met, it is a good time to initiate a position in the stock.

Conclusion

The American multinational giants, who has over 37 years of experience in the field,  are maintaining their strong grip on the memory and semiconductor market. The recent news of the 3D NAND Flash driver which is set to be released soon shows the company is maintaining its innovative edge. Moreover, with the Unigroup acquisition still in pipeline there is a golden opportunity to capitalize on Micron potential growth. In addition, many investors, as well as fundamental analysis, point to a promising future for the semiconductor firm. A word of warning though, some market analysts argue that Micron chips are in abundant supply and have limited demand which are in-turn cutting directly into Micron’s revenue streams and profitability.