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Micron Stockpiles After ‘Big Cheese’ Samsung Reportedly Cuts Orders

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.”

Alphabet Moonshot Company Nest Missed Revenue Outlook: Report

Employees are flying away from Nest, the smart home device maker that was acquired by Google for $3.2 billion in 2014 to compete with Apple ( AAPL ) in that growing market, but which isn’t generating the revenue that Google parent company Alphabet ( GOOGL ) had expected. A Re/Code report Thursday said that Nest’s initial three-year budget will run out at the end of 2016 unless Alphabet agrees to continue funding its Internet-connected home device division, and employees are nearing the point when their stock vests, meaning those workers will be able to finally cash in their shares. “Once the vesting period sunsets, some key executives could feel free to depart, something that several people close to the company said is very possible given the growing crisis,” said Re/Code . Nest’s original budget was around $500 million annually, the report said, and Nest’s revenue has fallen short of expectations. According to Re/Code, the company generated $340 million in revenue in 2015 — far below Wall Street estimates, which projected $400 million to $672 million in revenue. While Nest beat the $300 million internal sales target that Google set for the company when it was acquired, it made its numbers only by acquiring security camera maker Dropcam, according to the report. At a November meeting for engineers at Nest’s Palo Alto, Calif., headquarters, the company’s co-founder Matt Rogers said he was “losing sleep” over an exodus of staffers—roughly 70 in about six to 12 months, out of its workforce of roughly 1,000, according to a report in The Information last week. Nest CEO Tony Fadell allegedly pointed out that many of those departing employees had come from either Google or from Dropcam, which Nest bought in mid-2014. According to Business Insider, Fadell went on to say that about half of Dropcam’s 100 employees had left and that “a lot of the employees were not as good as we hoped. … Unfortunately, it wasn’t a very experienced team .” Alphabet’s executives have repeatedly said they intend to hold the lid on spending by the company’s speculative “moonshot” companies, a wide-ranging group that includes Nest. Alphabet, created last year as the parent company for Google and non-core businesses, broke out financials for its non-core ‘Other Bets’ long-shot subsidiaries for the first time in Q4, showing they lost $3.57 billion as a group in 2015, up from a $1.94 billion loss in 2014. Google’s ‘Other Bets’ segment posted revenue of $448 million in 2015, up 37% year over year, with the majority of revenue generated by the company’s smart home device group Nest, its fast Internet service Google Fiber and its health segment Verily, Alphabet and Google CFO Ruth Porat said on the company’s earnings conference call with analysts in February. Nest’s smart thermostat is its flagship product, while the company also earns revenue from its energy partnerships with utility companies. Nest also sells its Protect smoke detector and Nest Cam, the home-monitoring video successor to Dropcam. Other products, primarily in home security, have long been in the works, Re/Code said . Alphabet stock was down a fraction in midday trading in the stock market today , near 763. Apple stock was also flat, near 109.

March Madness: ‘Final Four’ IBD 50 Stock Performers This Month

After college basketball teams duked it out all month long during “March Madness,” the four best performing teams will compete at the NCAA Final Four this weekend. Here’s a look at the IBD 50’s “Final Four” performers this month: Inphi ( IPHI ), Broadcom ( AVGO ),   Ulta Beauty ( ULTA ) and AMN Health ( AHS ). Inphi Leads IBD 50 Pack Inphi is up 33% in March. The chipmaker received bullish analyst commentary this month, including an upgrade to buy from Deutsche Bank, as Inphi announced new products. Shares cleared a double-bottom base buy point on March 17, and gapped up to clear a secondary entry just a few sessions later. The stock is now trading near all-time highs, down 1.4% Thursday. Apple Supplier Climbs On Earnings Apple ( AAPL ) supplier Broadcom has gained 17% this month, fueled by a first-quarter earnings beat and estimate-topping second-quarter guidance. Shares cleared a double-bottom base buy point on March 4 and climbed out of an 8-month-long consolidation less than two weeks later. The stock set another all-time high intraday, turning down 0.9% in the afternoon. Meanwhile, Apple fell fractionally Thursday. Ulta Gains Look Good Ulta Beauty also gained 17% for the month. Nearly all of those gains came on March 11, after the beauty products retailer issued a view-topping quarterly report the prior evening. The move helped the stock break out of a consolidation base with a 188.58 buy point. The stock has traded in a tight range since, and is still in buy range as it dipped 0.4% Thursday. Health Care Stock AMN Powers Higher AMN Healthcare jumped 19% in March, building on gains from the health care staffing firm’s better-than-expected earnings report in February. Shares reclaimed their 200-day line near the start of the month and have been able to find support above that level as they continued to climb higher. The stock hit a six-month high on Thursday, up 0.6% in afternoon trading, and is trading 9% below its high reached last September. Where Are Facebook, Alphabet? The IBD 50 list also sports names like Facebook ( FB ) and Google owner Alphabet ( GOOGL ), which have racked up modest gains this month. Facebook has risen 7% and Alphabet has also gained 7%. Both are working on the right side of consolidations, with Facebook particularly close to a buy point. Facebook and Alphabet shares fell fractionally Thursday afternoon. Image provided by Shutterstock .