Micron Technology Inc

Micron Technology Inc (NASDAQ-GS: MU) is a US-listed technology Company. The Company is engaged in the business of semiconductor systems.

The Company will release Q2 FY2021 results on 31 March 2021.

Investment Highlights - Micron Technology Inc – Hold at USD 88.85

• The Company has delivered an increase in financial performance in Q1 FY2021 and expects further increase in financial performance in Q2 FY2021.
• In the last one year, the Company delivered a significant return of ~106.68% and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, the EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow and Price/Book Value multiples of Micron Technology Inc are currently lower as compared to the corresponding multiples of the Semiconductors & Semiconductor Equipment industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, shares were trading above the short-term support level of 200-day (USD 61.12) simple moving average prices, which reflects an uptrend in the stock.

Key Risks

• Increased competition could reduce the number of available investment opportunities.
• The Company is also exposed to various operational and financial risks with cybercrime, regulatory changes, and foreign exchange fluctuations.

Recent News

On 4 March 2021, Micron Technology announced the selection of Raj Hazra as general manager and senior vice president of Compute and Networking Business Unit.

Financial Highlights – Q1 FY2021 (3 December 2020) (released on 8 January 2021)

(Source: Quarterly Report, Company Website)

• In the first quarter of the financial year 2021, driven by an increase in NAND sales volumes, the revenue increased to $5,773 million (Q1 FY2020: $5,144 million).
• Driven by higher revenue, the profitability for the period increased. The Company reported net income of $803 million in Q1 FY2021 (Q1 FY2020: $508 million).
• The cash balance as on 3 December 2020 increased to $5,985 million (3 September 2020: $7,624 million).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Cash Flow Approach (NTM) (Illustrative)

Conclusion

The Company has shown an increase in financial performance in the first quarter of the financial year 2021. Both the top-line and the bottom-line performance improved, with higher profitability margins. The Company has a well-positioned balance sheet, while liquidity position for the period declined. Based on the strong performance, Micron Technology has increased its guidance for revenue, gross margin and EPS for Q2 FY2021. At present, the Company’s stock is trading near a 52-week high. The stock made a 52-week low and high of USD 31.13 and USD 95.75, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” recommendation for Micron Technology Inc at the closing price of USD 88.85 (as on 15 March 2021) and will recommend fresh buying at the right time.

Jabil Inc

Jabil Inc (NYSE: JBL) is a US-listed Company providing electronic manufacturing solutions and services globally. The Company has divided its business into two reporting segments, i.e., Diversified Manufacturing Services and Electronics Manufacturing Services.

Investment Highlights - Jabil Inc – Expensive at USD 48.84

• Despite the improved performance in Q1 FY2021, the Company’s performance remained impacted by the covid-19 pandemic and reported a lower liquidity margins.
• The Company has reported lower current ratio in Q1 FY2021 compared to the industry median, reflecting insufficient liquidity to meet short-term obligations.
• As per valuation metrics, the Price/Earnings multiple of the Jabil Inc is currently higher as compared to the corresponding multiple of the Electronic Equipment & Parts industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and is currently supporting downward movement (around 75 level), which means the stock price could decline in the short term.

Key Risks

• Liquidity and interest rate risks could affect the operations of the Company.
• The recent outbreak of COVID-19 may have a significant and prolonged impact on global economic conditions.

Financial Highlights – Q1 FY2021 (30 November 2020) (released on 17 December 2020)

(Source: Quarterly Report, Company Website) 

• In the first quarter of the financial year 2021, the Company has delivered a record revenue, the net revenue increased to $7,832,529 thousand (Q1 FY2020: $7,505,698 thousand).
• The profitability margins for the period improved, driven by higher revenue and lower operating expenses.
• The cash balance as on 30 November 2020 declined to $1,107,573 thousand (31 August 2020: $1,393,557 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company has shown an increase in financial performance in the first quarter of the financial year 2021. The profitability margins have improved, while liquidity position for the period declined. In Q1 FY2021, the Company has recorded a record revenue, core operating income and core earnings per share. Despite the improved performance in the first quarter of FY2021, the Company expects to deliver lower net revenue and operating in Q2 FY2021 compared to Q1 FY2021 data. Moreover, the Company’s stock is trading near a 52-week high, raising doubts at the upside potential at the current price level. The stock made a 52-week low and high of USD 17.63 and USD 52.03, respectively.

Based on the factors as highlighted above, we believe the stock of Jabil Inc is “Expensive” at the closing price of USD 48.84 (as on 15 March 2021), with support from few catalysts needs to be evaluated at a later stage such as actions taken to reduce operating expenses.

*Dividend Yield may vary as per the stock price movement.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.