Micron Technology (MU)

[realfast95]

Credit Suisse

Mix/Costs Outpunch ASPs
Bottom Line.
MU reported F1Q and guided F2Q WELL ABOVE Street and
INLINE with our out-of-consensus-and-more-controversial-than-we-thought
preview. While ASP trends were well telegraphed throughout the quarter, the
most impressive upside came from NAND GM of 49% up 900 bps q/q DESPITE
ASPs that were down LSD q/q – a strong proof point to our argument that cost
downs and mix should allow MU to improve profitability even with declining
ASPs. We are raising our FY18 and FY19 EPS to $10.30 and $10.60 from $8.00
and $8.15 vs. Street of $8.17 and $7.42, respectively, reiterating our Outperform
and raising our PT to $60 from $50 or 7.5x CY18 EV/FCF. Memory remains the
most structurally undervalued segment of Semis, as investors have focused too
much on the historical cyclicality and not enough on structural improvements:
Increasing Capital intensity, new applications/workloads and a compute
architecture that is fundamentally becoming more memory-intensive.