Hello once again guys welcome back to Stock radar I hope you guys are having a Great week and in this video here we're Going to be talking about Micron Technology it's one of the stocks I Frequently get questions about over on My YouTube channel and it's one that has Really gotten under the people's Radars Really over the past uh couple of months I would say is the time when I first Started getting comments and messages About Micron Technology and the reason Being is because this stock has a very Low p e ratio relative to the other Companies in the semiconductor Technologies industry uh having a PE of Just 8.4 if you compare that to stocks Like Nvidia or AMD or Intel or some of These other semi stocks their p e ratio Is a lot lower for Micron Technology and So a lot of people are interested in That stock for this reason but anyways Micron Technology is the company they Trade under the symbol mu This is an older company 39 years old They are definitely an aggressive growth Stock a p e ratio of 8.4 and one thing I Want to mention about that p e ratio is Later on when I look at the actual share Price over the last one year in the last Five years you're going to notice that On Google's uh place there where you Look at the stocks or whatnot when you Do a search on Google that landing page
Where it shows you the Share Price and The p e ratio market cap and whatnot the P e ratio is actually different there And I'm going to look more into this Just out of curiosity but from what I Can gather I would assume that Yahoo Finance is using a different amount of Data for calculating that p e ratio as Far as I know Yahoo finance uses the 12th trolling months of data to come up With that p e ratio and Google must just Be using some different data because You're going to notice they're slightly Different p e ratios on Yahoo finance Versus the Google page when you search For a stock if once I find out more About that I'll clear that up with you Guys but I just wanted to mention that Because later on when we talk about this Stock and look at it on Google you're Going to see a difference in that p e Ratio And then nonetheless the market Capitalization for this company is 62 Billion dollars and they are not a Company that pays a dividend so this is Left blank here they are not a dividend Stock they are still in growth mode so Let's go ahead and talk more about Micron Technology and what this company Actually is so we know this is a Semiconductor technology company and What they do is they produce a dynamic Ram or dram now I don't know if people
Call that dram or dram or what so maybe You guys can let me know I'm not like a Tech junkie at all so I'm going to refer To it as dram if I'm wrong about that I Do apologize they also produce flash Memory uh solid state drives is huge for Them right now and then they operate Under four different business segments They have compute and the networking Business unit they have the storage Business units they have the mobile Business units and then they have the Embedded business unit now as far as Their products go they have DDR3 and Ddr4 RAM products and those are used Primarily for desktop computers they're Used for servers they're also being used In the automotive industry and this Again just ties in with the fact that Everything is becoming more Sophisticated now everything has its own On-board computer and the automobile is No exception to that and so that's a Huge Market actually for micron Technologies is the Smart vehicles and The vehicles having these computer Technologies they also have industrial Applications for the DDR3 and ddr4 RAM Products and also for networking devices Now they also offer low power dram Dynamic Ram products that are useful for Smartphones tablets and mobile devices When they have to be concerned about Conserving battery power and then they
Also have the SSD the solid state drives For both um notebooks and desktops and Then also very interesting they have Enterprise solid state drives for Server Applications and they also have specific Cloud solid state drives and devices Which is very interesting giving them Exposure to that cloud computing segment Which is expected to grow rapidly over The next few years so that's a little Bit of a background there on Micron Tech Technologies a very interesting company And they have their hands in a lot of Businesses that are poised to have a lot Of growth over the next few years so a Very interesting company indeed let's go Ahead now and move on to the pros and Cons of Micron Technology stock and First of all the major Pro that people Have for this stock is the fundamentals Especially the p e ratio in that PEG Ratio so first of all we said they have A PE of 8.4 and they have a forward PE Of 5.48 now if you compare that to the Forward PE of a company like Nvidia or AMD this is a very very cheap stock in Terms of that price to earnings ratio The PEG ratio remember the closer that Is to one or above one that's going to Be overvalued if it's a one it's fairly Valued and under one it's undervalued in Terms of that growth potential for this Company and they're at a 0.16 So based On the FPE the 4pe and the PEG ratio
They are significantly undervalued the Other thing that I like about this stock And typically I don't pay attention to What analysts have to say I don't really Take much stock in there now analysis I Do my own analysis but what was Interesting is that the one-year Target Estimate among these analysts for Micron Technology stock is 72.72 a share And as of looking at the share price I Believe I pulled this data on Thursday That is a 35 percent implied upside to The stock just based on the analyst Price targets so that again is another Indicator that the stock is probably Undervalued at this point in time and That's usually a good thing to see is When analysts are overall expecting the Stock to go higher in the future and not Go lower another Pro for this stock is They are involved in a lot of new Technology like we said the cloud Computing the solid-state drives for Cloud computing applications also these Smart Automobiles and having computers Built in with the Automobiles and we're Actually going to be covering a lot more Of these new technology applications Later on when we look at the uh the Fundamentals we're going to be going Through the earnings report and talking About what they are focusing on as far As what technology areas they want to be Getting into with their applications the
Other Pro for this is that this company Is no longer Tethered to the PC this Used to be a company that was directly Tethered to the personal computer Because they essentially provided the RAM for the computers and all also the Storage devices the hard drives and Whatnot and so this was a company that Was Tethered to the PC and then as the PC started dying off the sales for the Actual components for those PCS was all Were also declining as well and so for a While this was a company that was Absolutely Tethered to the personal Computer but now they are definitely not Because they're involved in mobile Technologies they're involved with cloud Computing automotive and all these Different segments and Technologies and So they're well Diversified now as far As their portfolio of different Avenues And industries they're working with Whereas before they were just tied to The personal computer and that caused a Lot of supply and demand problems that's One of the cons we're going to talk About with Micron Technology is a big Issue they've had in the past is the Boom and bust cycles of both the dynamic RAM and the Nan storage so that's Something that they've had problems with In the past they're being a shortage and Then an oversupply and then those prices Going up and down and as a result their
Revenue and earnings would also go up And down and then being tied to the Personal computer once we saw sales Slipping for personal computers their Sales were slipping as well but that's No longer the case for micron as far as Being Tethered to the PC so that is Definitely a pro another Pro for Micron Technology is indicated in the earnings Report we're going to read into this a Little bit later on but they talk about How they're transitioning away from Being a supplied company instead of just Supplying components they're going to be A all-out Solutions company which is Definitely an area they want to get into Because the problem with being a supply Company is that it becomes a race to Zero when you have other people out There making the same components making The dynamic Ram products in the nand Storage devices my example for this one Example of Nan storage is a flash drive And I wouldn't imagine the flash drive Business is a very profitable business Anymore the other day I had to order Some on Amazon and they were like six or Seven dollars maybe even less a piece I Think actually they were five dollars a Piece for 16 gigabyte flash drives I can Remember when you would pay a lot of Money for those and the with the storage Devices particularly the flash storage It ends up being a race to zero and so
If your soul is supplying these pieces Of equipment you're going to be seeing The prices falling and falling and so All you're trying to do is get faster Storage get better storage at a cheaper Price and it eventually becomes a race To zero because all you're offering is a Better price and the only way you can Compete with others is on price and Nothing else but now that they're Becoming a Solutions company they're Talking about tying together their Memory products with their storage Products and so for one example they Were talking about with the automotive Business they're supplying the actual Memory products for the computers in These automobiles but they're also Supplying that back end cloud storage And those solid state devices for the Cloud storage where they're going to Have to do a lot of cloud computing and Of course the machine learning and Artificial intelligence side of that so They're kind of tying that all together And offering Solutions and not just These components and Hardware which is a Big plus for Micron Technology and the Other Pro I have for Micron Technology Is they're expecting to see 20 growth in Dynamic Ram in 2018 as far as the Industry goes and they're expecting to See 45 percent or more growth in the Nand storage now we have to move on to
The cons here okay so first of all the Number one con for Micron Technology is They have been prone to previous Oversupply issues where again there's Some demand in the nand storage and the Dynamic Ram devices and then there's Going to be a oversupply hit the market And then you're going to see the demand Taper off and as a result the prices are Going to go up and down and up and down And in the past this has affected their Revenue and earnings especially when They were too heavily reliant on the PC But as we know that's not really the Case anymore as far as having just one Useful application for their technology Now they have many different ones and so We are hoping that that is going to keep Demand high enough that the prices are At a point where they can make a healthy Profit but there have they have had this Issue in the past of having the Oversupply hit the market and then it Affects their Top Line and bottom line As a result so that is still a threat For Micron Technology just based on What's happened in the past the other Con for Micron Technology and really I Don't care about this but it's just Worth noting is that analysts are Completely torn on this stock there's Some people saying it's going to go to a Hundred dollars a share other people say That it's overvalued and it's going to
Go down to 10 or 20 a share it's a stock Where analysts are on one side or the Other and what you're going to find with That is you're going to have a lot of Volatility when you're going to see Analysts changing their mind about Things or changing their price targets We're probably going to see that stock Go up and down and it does have a beta Of I believe about a 1.4 and so it is a Little bit more volatile than the market Which is expected from a tech stock but That's the one thing I will say is Because analysts are so torn on this Stock we're probably going to see some Volatility and drastic price movements When analysts are making recommendations The other con again we talked about how Previously especially with the nand Storage end of this business they were Involved in a race to zero but because Of the fact that they're becoming more Of a Solutions and not a supply business I don't really see that as a threat Anymore and then finally they are Heavily reliant on the dram side of Their business the dynamic Ram that's About two-thirds of their business and So if we did see an oversupply in that Market that would significantly impact Uh the revenue and earnings for this Company but again hopefully the the Demand stays high enough with all these New technology applications but that's
Going to wrap up the pros and cons side Of this analysis now we are going to Talk about the barriers to entry for Micron Technology and primarily I see Three different ones first of all it's Going to be their array of patents that They have on their components and Whatnot and so that is something that's Going to protect them from the Competition and if somebody else was Going to start producing the components They are they would have to be careful As far as stepping on the toes of Micron Technologies patents number two would be The research and development as well as The technology behind this company and Then the third one is the fact that this Is a cost sensitive market and so There's a lot of upfront costs Associated with entering this space and If a company was trying to recoup those Expenses they would have to have higher Priced products and if they're going to Be more expensive than competition People aren't going to be just buying The new one for no reason especially if You think about the fact that these Components are involved in our Smartphones they're involved in our Computers and in automobiles things like That these manufacturers are going to be Looking to buy the cheapest and best Quality components out there and so They're going to be buying whatever is
The best price that way they can keep Their prices low to be able to compete On price on their end so it's not a Market you're going to see a lot of People getting into just because it is Cost sensitive but anyways guys that's Going to wrap up the beginning of this Analysis now we're going to jump over And look at the fundamentals and the Balance sheet and the different Financial documents okay so now we're Going to look at some of the Fundamentals here of Micron Technology Stock and as always we're going to start By looking at the balance sheet and Looking at the assets so first of all We're going to start with the total Assets here total assets have grown Every single year since 2014 at an Average rate of 16.6 percent per year Double digit growth is very good to see With a stock like this but it's actually Going to get more exciting as we go Along here looking at their progress Over the last four quarters now total Assets grew 28.3 percent from 2016 to 2017 very strong growth in uh between Those two years current assets declined From 2014 to 2015. but they grew every Year since 2015 thereafter and we saw That cash and cash equivalence grew for 23.4 percent from 2016 to 2017 very Strong growth in cash and cash Equivalents as well and then here's
Where we get some really exciting Numbers here as far as why we're seeing So much excitement surrounding Micron Technologies right now total assets grew 24 from quarter three of 2017 to Quarter Two of 2018 and current assets grew 43.7 Percent from quarter three of 2017 to Quarter Two of 2018 and the most Exciting one to me cash in cash Equivalence grew 93.3 percent from Quarter three of 2017 to Quarter Two of 2018. they nearly doubled their cash in Cash equivalents in just four quarters Uh fantastic numbers here coming from Micron Technology now we're going to Take a look at the liabilities so total Liabilities have increased every year Since 2014 at an average rate of just 13.4 percent per year and so from that We can gather that total assets are Outpacing the growth of total Liabilities something I'm always looking To see on a healthy balance sheet now What's interesting to note as well here Is that total liabilities have trended Downward over the last four quarters Excluding quarter one of 2018 to Quarter Two of 2018. and total liabilities Decline nine percent from quarter three Of 2017 to quarter of two of 2018. now In the same time frame total assets grew 24 percent and so that's a big plus for Micron Technology we're seeing Significant improvements in the balance
Sheet where liabilities are shrinking And assets are growing next we're going To take a look at the total revenue cost Of Revenue gross profit and cash flow From operations so gross profit Significantly declined from 2015 to 2016 And if we look at the share price we're Going to see that in a little bit that Is when the stock kind of had a bit of a Slump however gross profit increased 236.7 percent from 2016 to 2017. Absolutely fantastic numbers now net Cash flow from operations has increased In each of the last four quarters and And net cash flow from operations Increased 80.6 percent from quarter Three of 2017 to Quarter Two of 2018. Again that is why we're seeing such an Increase as well in the cash and cash Equivalents on the balance sheet total Revenue increased 63.9 percent from 2016 To 2017 while cost of Revenue increased To just 20.1 percent so we're seeing a Significant increase in the total Revenue with not nearly as much of an Increase in the cost of Revenue which Means that Micron Technology is seeing Much better profitability and that's Going to be indicated in the financial Ratios we're going to look at in just a Second now another thing to look at as Well over on the right hand side looking At the total revenue cost of Revenue and Gross profit over the last four quarters
It has grown in every single quarter Here we're seeing a nice strong upward Trend on stable cost of Revenue so cost Of Revenue is flat and we're seeing Total revenue in gross profit increasing I could not be happier looking at Numbers like that typically you're going To be seeing cost of Revenue increasing With your total revenue as you're Spending more money obtaining those Sales but what you're seeing here is Very relative stability with the cost of Revenue and increasing total revenue Meaning better profitability for this Company and then the liquidity ratios Are fantastic for this company 234 Current ratio 175 quick ratio and a cash Ratio of 102 percent those are fantastic Numbers they have a very healthy balance Sheet and then when we look at the Profitability ratios here as you can see 2016 was a terrible year for Micron Technology with just a one percent Operating margin and two percent profit Margin but if you look at 2017 these are The strongest numbers they've ever seen They have 42 gross margin compared to 32 In 2015 29 operating margin compared to 19 in 2015 and 2014 26 pre-tax margin Compared to 16. 25 profit margin Compared to 18. 28 pre-tax return on Equity compared to 21 and 27 after tax Return on Equity compared to 21 four so These are the strongest numbers we've
Seen in a very long time here for Micron Technology and they also have great Liquidity ratios indicating a very Healthy balance sheet moving on now Let's take a look at the share Performance over the last year and over The last five years and as you guys can See there on the bottom left it says p e Ratio of 6.15 and Yahoo finance put it At an 8.4 so it's kind of weird how Those numbers are different but they Must be just pulling these using Different amounts of data or a different Timeline as far as the data they're Using so Micron Technology stocks soared In early 2018 but then came back to Earth in late March as you can see it Traded up in above the 60 a share range And now we're somewhere around 50 to 52 Dollars a share and so the stock moved Hot and heavy in the beginning of this Year and now it has been kind of pulled Back to reality a little bit so over the Last year Micron Technology stock is up 83.9 percent compared to a 37 return From a semiconductor and semiconductor Equipment industry so it has Outperformed the industry over the last Year and over the last five years Micron Technology stock is a 445.3 percent Compared to a 183.9 return from the Semiconductor and semiconductor Equipment industry so over the last one Year and five years Micron Technology
Has significantly outperformed the Industry again what we like about this Stock is the fact that Micron Technology Is trading at a PE of 6.2 and a forward PE of 5.2 and in terms of the price to Earnings ratio Micron Technology is one Of the best value opportunities in the Semiconductor industry now while Micron Technology is still vulnerable to the Boom and bust cycles of the industry the Long-term prospects should keep demand High because they are Diversified across A number of different new technologies And with a beta of 1.43 Micron is still A suitable stock for beginners with a Moderate risk tolerance but like most Tech stocks it's going to be a little Bit more volatile than the market but it Does seem like an interesting value Opportunity with great long-term Prospects moving on now let's go over Some key financial notes from the second Quarter 2018 teen earnings report so Micron Technology delivered record high Revenue gross profit earnings per share And cash generation and total Solid-state device sales are up 80 Percent year over year very strong Number there Micron Technology achieved Record high automotive design wins as Far as their automotive technology Applications and solutions and market Trends are indicating steady demand for The nand and dram devices compute and
Networking business unit Revenue was up 93 percent year over year that was the Strongest segment for them mobile Business unit Revenue was up 45 percent Year over year embedded business unit Revenue was up 41 year over year and Storage unit business Revenue was up 20 Percent year over year so last week when We took a look at Alibaba I went through And did some snapshots from the earnings Report and I got some feedback from a Few of you guys you said you liked that And so we're going to continue doing That in all of these videos so now we're Going to go through and take a look at The uh the dialogue here from that Earnings report and as far as the Presentation goes so first first of all What we saw here is they said that our Growing portfolio of managed nand Solutions and low power ddr4 products Boosted our mobile business to record Revenue and profitability during the Quarter we also grew our solid state Device share in our second quarter with Total SSD sales up 80 percent year over Year and sales of cloud and Enterprise Drives more than tripling over that same Period in my opinion that's the most Exciting part of this business is the Cloud in Enterprise drives as far as the Cloud computing end of the business and To see that tripling in that same period That is a very strong number and I think
This is a great Avenue for Micron Technology to be involved with continued Strong penetration of our highly Competitive ddr4 products into cloud Computing applications and our Industry-leading high performance Graphics memory portfolio into gaming Graphics and crypto mining applications Contributed to a robust 15 sequential Growth for our compute and networking Business strong demand for our dram and Nand products delivered records second Quarter revenues for us in the Automotive Market again a very exciting Market to be involved with and it says We continue to execute well in our goal Of introducing new products in our Advanced Technologies delivering Performance quality Supply and cost Advantages to our customers now this was Interesting here as well as far as the Mobile side of their business or the Embedded side of the business at Mobile World Congress recently phone Manufacturers featured high-end Smartphones with larger 4K displays Multiple high resolution cameras and 4K HDR video recording capabilities like This have driven increased memory and Storage requirements in recent years but Perhaps the most impressive were the Multiple implementation of artificial Intelligence and virtual reality oems Are building new artificial intelligence
Augmented reality and lifelike virtual Reality capabilities into high-end Phones including facial and voice Recognition real-time translation fast Image image search and scene detection To support these data intensive Capabilities Flagship and high-end Smartphones are migrating towards six Gigabytes of LPD Ram a trend that bodes Well from Micron given our leadership in Lpdram power efficiency again that's a Major piece of this is that power Efficiency just because that is Essential for optimizing battery life so Micron Technology is poised to do very Well with the growth of the smartphone Technologies average storage densities Are also increasing across all Smartphone classes with new flagship Models using 64 gigabytes of flash Memory as a minimum microns portfolio of Managed Nan Solutions is well suited to Address the growing demand and we are Leading the industry in TLC utilization With a portfolio that leverages the Strong Act attributes of our 3D Nan Technology so Micron Technology is Poised to do very well on both ends here As far as the memory needed for these Sophisticated smartphone applications Involved in both artificial intelligence And virtual reality as well as the Displays and high resolution cameras and They are also poised to do well on the
Storage end and the flash storage with Their nand storage so smartphones are Going to be a big winner here for Micron Technology now the other segment that's Very interesting to me as well here is The automotive segment it says here of Course the growing adoption of AI is not Limited to mobile at the Consumer Electronics Show several companies Showed AI Smart cockpits in new Automotive models these systems Integrate the instrument dashboard Infotainment and telematic systems with A centralized compute and storage Architecture to create a data center on Wheels voice and gesture recognition Combined with driver alert monitoring Capabilities are making automobiles more Intelligent and much more compute Intensive require hiring higher capacity And more powerful memory and Storage Solutions Micron is already working with Automotive customers who will benefit From our highest speed Automotive grade LP ddr4 Solutions in the near term and New memory Technologies in the future Like our high bandwidth gddr6 Graphics Memory the new features in mobile Automotive and other connected devices Require rapid data analysis and storage In Enterprise and Cloud servers Including machine learning training and Inferencing to complement the compute Taking place at the edge this is driving
Significant investments in the data Center and growing demand for both Memory and high performance storage so Again this also is going to tie into a Healthy increasing demand in both that Storage and as well as the actual Applications used for these memory Products as far as the dram end of the Business goes it says we project drim Industry bit output to grow in the 20 Range for calendar 2018 and as far as The Nanda Market goes they expect it to Be somewhat higher at more than 45 Percent in calendar 2018 and this is for The entire Market not just for Micron Technology moving on here this was Interesting as well the performance by Product line uh 71 of overall company Revenue in the second quarter of 2018 Came from dram products and 25 came from Their uh trade and products so that's Their two major product line segments For Micron Technology and then this year Was just a nice summary of what we Talked about earlier looking at the Earnings report as far as their end Market trends and the biggest new Technology areas they're going to be Seeing growth from first of all it was The mobile technology second of all it Was the smart vehicles and AI smart Cockpits and then third of all it is the Growth in the data centers and the rapid Analysis and storage that is taking
Place so this is here if you guys want To pause this and take a look at it but We already discussed this so I'm going To go ahead and Skip forward and then Also what we talked about earlier was That anticipated industry growth for Both the dram and nand that's mentioned Here as well but anyways guys that's Going to wrap up our analysis here of Micron Technology stock I hope you guys Enjoyed this video please share any Feedback you have with me over in the Facebook group as I'm always looking to Improve the analysis here and help you Guys out with this and so let me know What you guys think about this over in The group but thank you so much for Watching and I will see you in the next Video
