July 14, 2015 | 10:59 AM by Fahad Khalid | fkhalid@jaguaranalytics.com

Micron (MU) Analyst Notes after Tsinghua Offer

Micron (MU) Street Takeaways after purportedly being offered $21 per share by Tsinghua Unigroup:

Cowen analyst Timothy Arcuri –
Suggests the deal does not make much sense and is not in the best interest of MU’s shareholders; thinks that the US DOJ would not allow this to happen given the increasingly strategic nature of DRAM to INTC and the US technology sector, feels INTC would seem to find greater value in acquiring MU’s portfolio outright given its longstanding partnership and understanding of the growing importance of DRAM and NAND on its new Purley server platforms. Notes the bid price is barely above estimated replacement cost for MU’s capacity.
Target is $30
Maintains an Outperform rating

Goldman Sachs analyst Mark Delaney –
Notes that at $23 bn, Micron would be valued at 4X next twelve months (NTM) Street EBITDA, and at $21 it would be valued at 10X NTM Street EPS – that compares to the three-year median M&A multiples for semi transactions of 13X NTM EBITDA and 24X NTM EPS. Believes that while M&A discussion may provide near-term support for the stock – DRAM offers below average growth, is capital intensive and that the DRAM industry has already meaningfully consolidated.
Target is $15
Maintains a Sell rating

Jefferies analyst Sundeep Bajikar –
Believes such a bid would be consistent with the thesis that 1) MU is deeply undervalued at current levels, 2) DRAM and 3D NAND manufacturing technologies are strategic for China but difficult to access, and 3) Micron’s technology positions in DRAM and NAND (esp. 3D NAND) are likely to improve significantly over the next 12 to 18 months. Thinks that even at the $21/share acquisition price (19% premium to MU’s closing price on Monday) suggested by the WSJ, MU would be deeply undervalued.
Target is $36
Maintains a Buy rating

Morgan Stanley analyst Joseph Moore –
Even without confirmation thinks this increased focus on Micron’s potential strategic value puts a clearer floor under the stock. Notes obstacles to the deal as: the reported bid price of $21 is only a 19% premium to today’s close,and is still 40% below where the stock traded early this year; 2) there may be political ramifications to a Chinese company trying to buy the only American DRAM manufacturer; 3) expects DRAM fundamentals to continue to be difficult, with oversupply persisting in 3q, likely a modest seasonal 4q recovery,and then a highly uncertain situation in 2016
Target is $19
Upgrades to Equal-Weight from Under-Weight

Topeka Capital analyst Suji Desilva –
Notes that while the deal remains speculation, nonetheless recent checks indicate that sourcing/owning memory capacity locally is a key theme in China’s effort to establish domestic semiconductor suppliers. Believes any level of interest in MU by China is consistent with the firm’s constructive thesis that MU memory capabilities are currently being undervalued in the marketplace.
Target is $28
Maintains a Buy rating


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