2. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 69
Micron Technology, Inc. (NASDAQ:MU) is an Idaho-based memory and storage products company, operating through four segments – Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit. Micron Technology, Inc. (NASDAQ:MU) announced on September 1 a $15 billion investment to build a fabrication plant for leading-edge memory manufacturing in Boise, Idaho. This is the first in a series of investments by Micron Technology, Inc. (NASDAQ:MU) since the CHIPS Act was passed.
Deutsche Bank analyst Sidney Ho on August 10 reiterated a Buy rating on Micron Technology, Inc. (NASDAQ:MU) but lowered the price target on the shares to $68 from $70. The analyst is “not entirely surprised” by Micron Technology, Inc. (NASDAQ:MU)’s negative pre-announcement given the ongoing deteriorating inventory adjustments in the supply chain. He is encouraged that Micron Technology, Inc. (NASDAQ:MU) is now planning to significantly slash its fiscal 2023 capex and believes the shares are near a “trough.”
Among the hedge funds tracked by Insider Monkey, David Goel and Paul Ferri’s Matrix Capital Management is one of the leading position holders in Micron Technology, Inc. (NASDAQ:MU), with 4 million shares worth over $221 million. Overall, 69 hedge funds were bullish on the stock at the end of June.
Here is what Hazelton Capital Partners has to say about Micron Technology, Inc. (NASDAQ:MU) in its Q3 2021 investor letter:
“It’s hard to explain how shares of Micron Technology, manufacturer of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated – there are now just 3 major producers of DRAM and 5 on the NAND side – rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides.
Currently Micron Technology trades at just 8x 2022 estimated earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve.”
