Author Archives: Scalper1

Micron Technology ( MU ) supplier FormFactor ( FORM ) cut its Q1 guidance Tuesday, indicating that key rival Samsung might curtail production amid a memory-chip glut, Summit Research analyst Srini Sundararajan said Thursday. Wall Street largely blames Samsung for inundating the DRAM (dynamic random-access memory) market, thereby forcing prices to plunge. Late Wednesday, Micron acknowledged the 10% sequential drop in DRAM prices hit its fiscal Q2 top line. For its fiscal Q2, which ended March 3, Micron reported $2.93 billion in sales, down 30% year over year, and a five-cent per-share loss ex items vs. 81 cents earnings per share minus items in the year-earlier quarter. Sales missed expectations for $3.05 billion, but the bottom line topped analysts’ model for an eight-cent per-share loss minus items. Micron’s current-quarter guidance for $2.8 billion to $3.1 billion and a per-share loss ex items of 5-12 cents lagged the consensus of 33 analysts polled by Thomson Reuters. The consensus modeled $3.2 billion and five cents earnings per share ex items. At the midpoint of guidance, sales would fall 23%. In the year-earlier quarter, Micron earned 53 cents per share. As of early afternoon on the stock market today , Micron stock was down about 3%, trading just above 10. At least seven analysts cut their price targets Thursday on Micron stock. At least two downgraded Micron stock. Missed Qualification Pressures Costs Mobile wasn’t Micron’s saving grace in Q2, Pacific Crest analyst Monika Garg wrote in a research report. Garg cut her price target on Micron stock to 13 from 18 but reiterated an overweight rating. During Q2, mobile sales pulled in $503 million, down 40% sequentially, as Micron missed a key qualification, leading to extra inventory on the sheet. Now, Micron says, it will hold more inventory and maintain full utilization. August and November are likely to be seasonally stronger, Micron says. But “this likely does not sit well with memory investors who are concerned about potential oversupply,” MKM analyst Ian Ing wrote in a report. Cowen analyst Timothy Arcuri agreed. Micron was supposed to reach cost reductions in May on its 20-nanometer DRAM build, he wrote in a report. The qualification miss hurt those reductions. “Average sales price declines are still more than offsetting these declines,” he wrote in a report. “There is likely to be at least one more good cost-down DRAM quarter from 20-nm in (August), but the inventory build threatens any material recovery in (pricing).” Arcuri cut his price target on Micron stock to 13 from 20, “throwing in the towel” on any big stock move back to 20. He maintained his outperform rating. Credit Suisse analyst John Pitzer says that Micron is likely building inventory to better its cost disadvantage vs. peers like Samsung and SK Hynix. Pitzer reiterated an outperform rating and 20 price target on Micron stock. Ing rates Micron stock a buy and has a 19 price target. Can Micron Gain On Samsung? The memory oversupply led to a 9% and 10% sequential decline in Micron’s DRAM shipments and pricing. Nand (flash memory) saw respective declines of 11% and 15% quarter over quarter. Pricing will better in Q3 and Q4, Ing wrote. For DRAM, he expects sequential declines of 10% and 8%, and he models 10% and 7% declines in Nand pricing over the next two quarters. Ing sees Micron gaining share vs. Samsung on better gross margins, but Macquarie analyst Deepon Nag says that Samsung will win on its weighty pricing pressure. Nag cut his price target to 12 from 14 and downgraded Micron stock to neutral from an outperform rating. Summit Research’s Sundararajan reiterated both a 14 price target and a buy rating on Micron stock, noting that Micron will likely start making profits in November on capital expenditure cuts by key rivals and 20-nm-related cost reductions. FormFactor, which supplies probe cards for Micron, Intel ( INTC ), Samsung and SK Hynix, said Tuesday that it couldn’t meet DRAM demand from one customer and that other vendors had pushed orders out another quarter. The guidance cut indicates depressed DRAM demand. To that point, Apple ( AAPL ) cut the DRAM in its new iPad Pro vs. the first iteration. “Heavy curtailment by the big cheese (Samsung) is already underway,” Sundararajan wrote in a report. “With such brakes being cut, clearly, the DRAM makers have gotten religion.”