March 27, 2012
Welcome to the Stock of the Day for March, 27, 2012. Nowadays, many of our most beloved gadgets (computers, mobile phones, etc.) are powered by integrated circuits, also known as microchips. So today we're going to look at Micron Technology Inc. (MU), one of the largest producers of memory chips in the world, and see if this company is just as powerful as its cutting-edge technology.
Company Overview: Micron Technology is only 34 years old, but in the semiconductor industry, that's ages. In the dark ages, Micron Technology's single product was a 64 kilobyte memory card that could only contain the amount of information that is in half of a newspaper. Over the years, the company has expanded the capacity of its memory chips hundreds of thousands of times over and has broadened out into chips that can power a whole host of products. Currently, the company employs 20,000 worldwide across four continents and brings in almost $10 billion in sales per year.
Industry Breakdown: There are 11 companies that specialize in Memory Chips, but Micron Technology is all over the map in terms of fundamentals. This company's claim to fame is that it is second-largest in terms of market capitalization. However, on other metrics this is an underperforming company. Micron Technology's negative Price/Earnings to Growth ratio is eighth in the industry and its negative sales ranks seventh. The company also has a negative return on equity, ranked sixth, and its meager long-term growth rate is second lowest in the industry. Micron Technology's main competitors are Intel Corp. (INTC) and privately-held Samsung Electronics Co. Ltd.
Earnings Buzz: The company reported second-quarter earnings after the closing bell on last Thursday, and the results were less than stellar. Compared with the same quarter last year, net sales dropped 8% to $2.07 billion; this slightly topped the consensus sales estimate of $2.02 billion. Over the same period, the company posted a loss of $224 million, or a loss of $0.23 per share. Analysts forecast a loss of $0.19 per share, so the company posted a 21% earnings miss. As to be expected, investors weren't thrilled by this earnings announcement, so shares gapped down 5% after Thursday's close. The stock hasn't quite regained its ground since then.
Current Ratings: Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. For the past 10 months, this stock has remained in sell territory. To start, the company's fundamentals are mediocre at best; the company's earnings momentum is B-rated and earnings surprises are C-rated. The other six fundamental metrics, including sales and earnings growth, receive my lowest score. In addition, buying pressure for the stock remains depressed. All in all, this is a D-rated stock.
Bottom Line: Right now, this is not a stock you want to include in your investing strategy. If you hold shares of MU, I suggest you find a good time to part ways with them.
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