The company posted strong Q3 earnings that beat on both top- and bottom-lines. Since there was such big hype around the report and because investors were especially bullish, the beat was priced in. However, Micron also raised Q4 guidance (for both revs and EPS) well above Street consensus.
Looking at current prices and earnings, the stock is trading at around 14x TTM P/E and 6-8x forward P/E (based on the company's range of Q4 EPS guidance). So shares are trading at a sizable discount to the broad market (S&P 500, Nasdaq, Russell) and at a HUGE discount to many chip stocks & FAANG.
The low trading multiples are mainly due to fear about the cyclical nature of the semi/chip industry. While both the company and analysts alike have a strong outlook for 2017Q4 and early 2018, many are predicting the worst thereafter. Of course, such pessimism is exaggerated and essentially treats the base case scenario as a very bearish one.
So at $30 you're buying a stock trading at a substantial discount to its peers, with consistent top and bottom line growth, expanding margins, and operating in a favorable industry environment. As of this morning, a slew of analysts upgraded their price targets and the CFO of the company remains openly bullish on the stock.
The main thing keeping shares down is institutional trading (and poor/false media coverage). Examples: (1) CNBC went crazy about NKE earnings, while pretty much skipping right over MU results and (2) MarketWatch published a misleading article stating the company missed on EPS. So couple fear for retail investors with many big banks & funds having written covered calls on the stock, and you'll have depressed prices for the short-term. Today is a prime example: recoverable for those with equity but pretty shitty for all call-holders. Institutions will win on their option writing, but this poses an amazing opportunity to the average Joe investor looking to take advantage of sleezy manipulation.
My PT is $35 by the end of July. By year-end shares could hit $50 a share. Price will stay depressed for a few weeks -- likely hovering around $32 -- until Jul 21st, when some high open interest options expire. Opportunities like these are pretty rare in the markets; not too often a company with STELLAR earnings and favorable fundamentals gets a big haircut. Buy if you wish.
Submitted June 30, 2017 at 12:05PM by CreatineKinase http://ift.tt/2s9YUo6
