3. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 78
Micron Technology, Inc. (NASDAQ:MU) is an American producer of memory chips and storage products. The company operates through four segments – Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit. The company plans to bring cutting-edge memory manufacturing to the United States with the CHIPS Act, which offers about $280 billion for domestic production, investment tax credit, and scientific research.
On July 27, Baird analyst Tristan Gerra said that the U.S. Senate passing the CHIPS Act could have a deflationary impact on semiconductor stocks in the intermediate-term as it will ultimately solve the supply challenges. The analyst said that the Act could result in Micron Technology, Inc. (NASDAQ:MU) reporting incremental, long-term capacity investments in the United States, and maintained a Neutral rating on the stock.
According to Insider Monkey’s data, 78 hedge funds were bullish on Micron Technology, Inc. (NASDAQ:MU) at the conclusion of the first quarter of 2022, compared to 83 funds in the last quarter. Matrix Capital Management is a prominent stakeholder of the company, with 4 million shares worth $311.56 million.
Here is what Hazelton Capital Partners has to say about Micron Technology, Inc. (NASDAQ:MU) in its Q3 2021 investor letter:
“It’s hard to explain how shares of Micron Technology, manufacturer of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated – there are now just 3 major producers of DRAM and 5 on the NAND side – rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides.
Currently Micron Technology trades at just 8x 2022 estimated earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve.”
