Build A Position In This Stock On Any Weakness

  • June 29, 2005
  • Melanie Hollands


I got this note from an investment bank about Micron
Technology
(NYSE: MU) last week (regular type is mine and I have replaced any abbreviations
with complete words):

 

MU-micro-results
but who didn’t know:



  • our
    semiconductor analyst) is wondering what will they do with their 200mm
    capacity – lots of rumors around options but no action as of yet. Switching to
    NAND in the face of plummeting pricing doesn’t get [    our semiconductor
    analyst] excited. All the image sensors and specialty products in the
    world can’t fill either (OK, maybe I exaggerate).


  •  

    The Semi B:B
    “stabilizing” at 0.85 (May2005 figure), or anywhere more than a tick or two
    below 1.00 is not a sign of a recovery. It just means slow death instead of a
    quick kill.  Surprisingly, the semi guys made no pretense that a move from 0.81
    to 0.85 was any type of good news. (After all, May made 2005 5-for-5 in sub-1.00
    ratios.)

     

    DDR /DDR2
    prices “stable” but below cost is exactly the same thing. A nickel or dime’s
    “recovery” after a $1.65 drop is really not news.

     

    It’s why so many
    DRAM wafers are being converted to NAND across the industry. That’s why
    we expect NAND will be next. The lag time is typically around 6 months and the
    conversions got really serious around February when the DRAM price tanked.

     

    All things being
    equal, I am looking to go long MU shortly; I’m just waiting for a few funds to
    puke it out after the ugly quarter. I would probably look to build a position in
    mid-to-late July.  I consider this to be more of a 3 to 6 month trade than
    anything else. At the margin, DRAM spot pricing should start to improve in late
    July / early August as long as we have a normal demand environment. The CMOS
    image sensor business seems to be taking share from OmniVision Technologies
    (NASDAQ: OVTI). The NAND business has no traction but could surprise. As always
    with MU, though, the focus and what drives the stock is DRAM spot pricing, and
    any slight improvement will be viewed positively, if only for a head fake. I
    would use any weakness in the stock or spot pricing the next 3 to 4 weeks to get
    long MU. 

     

    Melanie
    Hollands

    melaniehollands@yahoo.com

     

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