Memory chip maker Micron Technology (NYSE: MU) reports second-quarter earnings on Wednesday night. The last quarter was a sad story, and good news has been in microscopic supply for a long time. Is this the magic turnaround period? Read on.
What Fools say:
Here's how Micron's Motley Fool CAPS rating stacks up against some of its peers and competitors:
|
Market Cap (millions) |
Trailing P/E Ratio |
CAPS Rating | |
|---|---|---|---|
|
SanDisk (Nasdaq: SNDK) |
$5,030 |
24.2 | |
|
Micron Technology |
$4,490 |
N/A | |
|
Rambus (Nasdaq: RMBS) |
$2,450 |
N/A | |
|
Qimonda AG (NYSE: QI) |
$1,320 |
N/A | |
|
STEC (Nasdaq: STEC) |
$312 |
32.3 |
Data taken from Motley Fool CAPS on March 29.
The CAPS bulls like Micron as a turnaround play because the memory industry surely must be scraping the bottom of the sinkhole. The bears see just another former highflier being grounded by a weak economy and low consumer confidence.
What management does:
Oh dear. The gross margins tell the whole story here. Gross income was $5 million last quarter on $1.5 billion in sales, so pushing out more units isn't likely to help in this corrosive price environment.
|
8/06 |
11/06 |
3/07 |
5/07 |
8/07 |
11/07 | |
|---|---|---|---|---|---|---|
|
Gross |
22.8% |
24.5% |
25.7% |
21.9% |
19% |
11.3% |
|
Operating |
2.3% |
3.3% |
3.1% |
(1.4%) |
(5.1%) |
(11.1%) |
|
Net |
7.7% |
8.5% |
3.8% |
(1.7%) |
(5.6%) |
(12.2%) |
|
FCF/Revenue |
12.4% |
(3.2%) |
(29.4%) |
(40.9%) |
(46.9%) |
(43.7%) |
|
Y-O-Y Growth |
8/06 |
11/06 |
3/07 |
5/07 |
8/07 |
11/07 |
|---|---|---|---|---|---|---|
|
Revenue |
8% |
9.2% |
15.2% |
9.1% |
7.9% |
4.7% |
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
Micron is hardly alone in facing hard times in the computer memory industry -- profits are about as common as dodo birds, because of chronic global oversupply pushing down sale prices on every type of memory. The supply-and-demand imbalance will eventually correct itself, and probably overcorrect for good measure. Gadget makers like Apple (Nasdaq: AAPL) keep cramming more memory into their devices, and solid-state flash drives from SMART Modular Technologies (Nasdaq: SMOD), STEC, and others could soak up a good deal of the excess capacity over the next few years.
Those are positives for the mid-term to the far future. Right now, the memory market remains stuck in this miserable quagmire, and Micron will report another fat loss on flat sales. It's a well-managed company with many positives, but Micron can still sink a bit further before things turn around -- as they always do in this cyclical industry. This stock is watch list material today, but not portfolio fodder.
