Semiconductors are in high demand.
And our TrackstarIQ data points to Micron (MU).
Institutional advisors’ pageviews on the stock spiked in the last two days with no major news.
It’s particularly odd given the performance in the semiconductor space.
The SMH semiconductor ETF is only up 6.69% on the year.
Micron itself is up a little more than 2.6%.
We wanted to find out what the institutional players knew that we didn’t.
So, we rolled up our sleeves and dug into the data.
Micron’s place in the world
When we hear the word ‘semiconductor’, most of us conjur up images of the main microprocessor inside a computer – the engine that drives the beast.
However, the industry uses the term a bit more broadly.
In Micron’s case, it comes in two forms: DRAM and NAND.
DRAM stands for Dynamic Random Access Memory.
Back in the day, we used to just call this RAM.
Here’s a great diagram that lays out how this all works.
Main computer memory that holds all our programs is the external memory. The data stored here takes longer to access but holds a massive amount compared to dynamic memory.
DRAM is labeled as volatile because it requires power to retain data. Your hard drive doesn’t.
Random access memory allows the computer to grab any portion of the memory in the same amount of time.
In a nutshell – getting data from RAM is WAY faster than the hard drive.
DRAM works for your personal computer. NAND works for mobile devices.
Micron makes 71% of its revenues from DRAM and 26% from NAND.
Both of these are extremely important as automobiles and datacenters use DRAM and the smart phones work with NAND.
In their most recent quarterly results, Micron noted that DRAM demand growth is expected to be up 20% for the current year with long-term growth in the mid-to-high teens.
NAND demand growth is expected to land in the low-to-mid 30% range for the year and CAGR of 30% long-term.
Micron noted that supply would pace below demand for the current year.
Despite the recent run and pullback in shares, the stock remains incredibly cheap.
Current price-to-earnings ratio (P/E) sits at 28.2x, about in line with the S&P 500.
But the current year’s P/E estimates land at a paltry 14.0x with next year’s at just 7.2x.
Why so cheap?
Profit margins haven’t been great.
In the last 12 months, Micon’s profit margin landed at 13.6% compared to its peers ranging from 23.93% – 38.85%.
Even their most recent quarter landed at 9.67%.
To summarize a complicated process, Micron took a bunch of charges, some cash and non-cash, such as changes to inventory accounting, stock-based compensation, etc.
Most of these should be one-time items.
Our hot take
The selloff in semiconductors, and especially Micron could present one of the rare value opportunities this year.