Memory Stocks Make a Comeback (MU, SNDK)
Tweet
Share
E-mail
Get Alerts MU Hot Sheet
Price: $864.01 -13.25%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.8%
EPS Growth %: +923.6%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.8%
EPS Growth %: +923.6%
Join SI Premium – FREE
The memory chip industry is getting a big boost from Micron Technology, Inc. (NYSE: MU) today as the company posted the first profit for the company in three years. The company reported an EPS of $0.23, trumping the $0.06 sought by analysts, and revs were $1.74 billion versus the $1.59 billion consensus.
Does Micron's fantastic earnings report signal a renaissance in the memory chip industry? Other notable include SanDisk (NASDAQ: SNDK), STEC (NASDAQ: STEC), and NetList (NASDAQ: NLST).
Today, SanDisk received pgrade from ThinkEquity, and a price target of $35. ThinkEquity says that SNDK has strong tailwinds that include: 1) Better-than-seasonal NAND pricing trends in a weak build season globally, 2) Leaner channel inventory, 3) Major OEMs Samsung, Hynix, Toshiba currently running at 100% utilization, 4) No new fabs slated for 2010 and supply coming mostly from technology shrinks.
Shares of SanDisk broke through the $22 - $23 range in September, a range that they haven't seen since Samsung made a hostile takeover bid of $26 per share for the company, amounting to about $5.85 billion. So the question is, is the price surge, up from $7.53 in March 2009, warranted?
What about NetList? The company was trading at about $0.70 in early November, but has since been one of the most turbulent stocks on the NASDAQ, surging up to $7.27, then down to $4.36, and settling around $5.40, all with a few weeks. Volumes have also been up, from an average in the ten's of
thousands of shares per day, to the single- and double-digit millions. What caused the surge? Their launch of HyperCloud, the world's first 16GB, 2 vRank memory module for servers, on November 11, 2009.
On the other hand, STEC shares were lopped after talks of a competitor entering the enterprise solid-state market circulated. In September, shares fell 17% on 7x volume on the day that a Wedbush analyst issued a report stating that they were cutting their price target on the company to $39 from $46 on fears that the entry into the market would reduce STEC's leading role. Stifel Nicolaus also commented that they see STEC still strong for the next few quarters, but they would also be more cautious moving forward. STEC then took a 36.2% drop when they reported numbers above the Street, but guidance was weak for Q409. Generally, stocks with stronger fundamentals don't drop 36% on weaker guidance, especially after beating estimates for earnings.
So, with all of these considerations being made, what factor can make an investor venture into the memory chip industry? There are plenty. First, Apple's (NASDAQ: AAPL) iPhone is scheduled to potentially change service providers next year, possibly increasing production. However, consumers already using an iPod Touch may not be so eager to make the switch, as that device is basically an iPhone without the ability to call anyone.
Next, the emergence of Cloud computing. As mentioned above, Cloud computing will require new hardware and software to run, opening up a market for the memory chip makers.
Thinking about a new Netbook? Many are, and even Google is rumored to have one in the works. me+Basically a small laptop, the mini-computers may appeal to those on the go where a handheld device is too small, and a laptop is too expensive.
Also, USB memory sticks are always popular, and the uses of one are ever expanding. When memory device, much less computer hardware, appears on a Swiss Army Knife, you can bet that it's a popular item that won't go away until the USB standard becomes obsolete.
So, though the bubble earlier in the decade wasn't entirely founded, as many were still using dial-up modems and cell phones were just becoming cheap enough for mass usage, as the decade progressed and we come to a Fresh Ten, the foundation on which these companies are built upon are solidifying, and may just be sturdy enough to hold in your portfolio.
Does Micron's fantastic earnings report signal a renaissance in the memory chip industry? Other notable include SanDisk (NASDAQ: SNDK), STEC (NASDAQ: STEC), and NetList (NASDAQ: NLST).
Today, SanDisk received pgrade from ThinkEquity, and a price target of $35. ThinkEquity says that SNDK has strong tailwinds that include: 1) Better-than-seasonal NAND pricing trends in a weak build season globally, 2) Leaner channel inventory, 3) Major OEMs Samsung, Hynix, Toshiba currently running at 100% utilization, 4) No new fabs slated for 2010 and supply coming mostly from technology shrinks.
Shares of SanDisk broke through the $22 - $23 range in September, a range that they haven't seen since Samsung made a hostile takeover bid of $26 per share for the company, amounting to about $5.85 billion. So the question is, is the price surge, up from $7.53 in March 2009, warranted?
What about NetList? The company was trading at about $0.70 in early November, but has since been one of the most turbulent stocks on the NASDAQ, surging up to $7.27, then down to $4.36, and settling around $5.40, all with a few weeks. Volumes have also been up, from an average in the ten's of
thousands of shares per day, to the single- and double-digit millions. What caused the surge? Their launch of HyperCloud, the world's first 16GB, 2 vRank memory module for servers, on November 11, 2009.
On the other hand, STEC shares were lopped after talks of a competitor entering the enterprise solid-state market circulated. In September, shares fell 17% on 7x volume on the day that a Wedbush analyst issued a report stating that they were cutting their price target on the company to $39 from $46 on fears that the entry into the market would reduce STEC's leading role. Stifel Nicolaus also commented that they see STEC still strong for the next few quarters, but they would also be more cautious moving forward. STEC then took a 36.2% drop when they reported numbers above the Street, but guidance was weak for Q409. Generally, stocks with stronger fundamentals don't drop 36% on weaker guidance, especially after beating estimates for earnings.
So, with all of these considerations being made, what factor can make an investor venture into the memory chip industry? There are plenty. First, Apple's (NASDAQ: AAPL) iPhone is scheduled to potentially change service providers next year, possibly increasing production. However, consumers already using an iPod Touch may not be so eager to make the switch, as that device is basically an iPhone without the ability to call anyone.
Next, the emergence of Cloud computing. As mentioned above, Cloud computing will require new hardware and software to run, opening up a market for the memory chip makers.
Thinking about a new Netbook? Many are, and even Google is rumored to have one in the works. me+Basically a small laptop, the mini-computers may appeal to those on the go where a handheld device is too small, and a laptop is too expensive.
Also, USB memory sticks are always popular, and the uses of one are ever expanding. When memory device, much less computer hardware, appears on a Swiss Army Knife, you can bet that it's a popular item that won't go away until the USB standard becomes obsolete.
So, though the bubble earlier in the decade wasn't entirely founded, as many were still using dial-up modems and cell phones were just becoming cheap enough for mass usage, as the decade progressed and we come to a Fresh Ten, the foundation on which these companies are built upon are solidifying, and may just be sturdy enough to hold in your portfolio.
You May Also Be Interested In
- Liftoff closes $502.6 million IPO with full underwriter option exercise
- Host Hotels (HST) PT Raised to $26.25 at Stifel
- Lululemon (LULU) PT Lowered to $134 at Stifel
Create E-mail Alert Related Categories
Insiders' BlogRelated Entities
Stifel, ThinkEquitySign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
