Micron Technology, Inc.
MU Details
Micron Technology, Inc. (NASDAQ: MU) is a pioneer in memory and storage solutions. Its Micron and Crucial brands offer a diverse spectrum of high-performance DRAM, NAND, and NOR memory and storage devices. MU manufactures its goods in Taiwan, Singapore, Japan, the United States, Malaysia, and China and uses subcontractors to handle production operations.
Latest News:
- Validation of LPDDR5X: On November 19, 2021, MU announced that MediaTek Inc., a Taiwanese fabless semiconductor business, has verified its low-power double data rate 5X (LPDDR5X) DRAM for MediaTek's new Dimensity 9000 5G flagship chipset for smartphones. As a result, MU is the first semiconductor manufacturer to sample and validate the industry's fastest, most sophisticated mobile memory and has sent the first batch of LPDDR5X samples.
- On the way to Sustainable Development: MU announced the issuance of its first USD 1 billion green bonds on November 1, 2021. The net proceeds from MU's green issuances will be given to qualified initiatives that the firm believes may significantly advance goals, such as renewable energy, green buildings, energy efficiency, water management, pollution control, and a circular economy.
FY21 Results:
- Surge in Topline: Revenues climbed by 29.25% to USD 27.71 billion in FY21 (ended September 02, 2021) from USD 21.44 billion in FY20 (ended September 03, 2020), principally due to increasing DRAM and NAND sales.
- Boost in Bottomline: MU's net income increased significantly from USD 2.71 billion in FY20 to USD 5.86 billion in FY21.
- Healthy Balance Sheet: It has USD 8.63 billion in cash and cash equivalents (including short term investments) as of September 02, 2021, with a total debt of USD 6.78 billion.
Key Risks:
- Customer Concentration Risk: In FY21, sales to WPG Holdings Limited accounted for 13% of MU's total revenue. Kingston Technology Company, Inc. contributed 11% of total sales in FY20 and FY19. In FY19, Huawei Technologies Co. Ltd. accounted for 12% of total revenues. The company's financial and operational health may be compromised in the future if it relies too heavily on a few critical clients for revenue.
Outlook:
- Q1FY22 GAAP Estimates: In its Q4FY21 press release, MU indicated that it expects its GAAP sales in Q1FY22 to be approximately USD 7.65 billion (+/- USD 200 million), with a gross margin of roughly 47% (+/- 1%).
- Expense Estimates: MU further expects its GAAP operating expenses to be around USD 915 million (+/- USD 25 million) and diluted EPS to be around USD 2.10 (+/- USD 0.10)
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
MU Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
MU's share price has increased 2.89% in the past six months and is currently trading above the mid-point of the 52-week range of USD 59.65 to USD 96.96. The stock is trading above its 50 and 200 DMA levels, and its RSI Index is at 75.86, indicating an overbought zone. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 88.28.
Considering the slight uptick in the stock price,, new product launches, steady dividend, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 83.05, up 7.83% as of November 19, 2021, at 11:33 AM ET.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
Cognex Corporation
CGNX Details
Cognex Corporation (NASDAQ: CGNX) is a global manufacturer and distributor of machine vision technologies that help companies automate their production and distribution processes. It also offers maintenance and support, as well as consulting and training services. Machine vision systems and sensors, vision software, and image-based barcode scanners are among CGNX's core products (ID devices). As of November 19, 2021, the company's market capitalization stood at USD 14.03 billion.
Latest News:
- Payment of Dividend: On November 04, 2021, CGNX declared a quarterly dividend of USD 0.065 per common share (representing sequential growth of USD 0.005 per share), payable on December 03, 2021, to shareholders of record on November 19, 2021.
Q3FY21 Results:
- Growth in Revenue: The company reported a YoY increase of 13.45% in revenues to USD 284.85 million during Q3FY21 (ended October 03, 2021) from USD 251.07 million during Q3FY20 (ended September 27, 2020), attributable to61% YoY growth in Standard products and services segment.
- Decline in Profitability: CGNX reported a decrease in net income to USD 78.90 million during Q3FY21 vs. USD 87.51 million in Q3FY20.
- Cash and Debt Position: As of October 03, 2021, the company had cash and cash equivalents (including marketable securities) of USD 392.59 million and no outstanding debt.
Key Risks:
- Customer Concentration Risk: CGNX derives the majority of its revenue from a limited number of customers. For example, in FY20, CGNX's top two customers accounted for a significant portion of its revenue. Hence, the loss of any of these critical clients could harm its financials.
- Competition Risk: CGNX operates in a highly competitive machine vision industry with aggressive price competition from its major players. Should this trend continue, it could adversely impact the company's financials.
Outlook:
- Revenue Estimate: As of Q3FY21, CGNX expects its Q4FY21 revenues to range between USD 210 – 230 million, with a gross margin in the low-70% range.
- Operating Expenses Estimates: Operating expenses for the next quarter are also expected to grow in the mid-single digits on a sequential basis driven by CGNX's investments towards growth plans such as additional resources, new product development, as well as sales and marketing efforts.
Valuation Methodology: Price/Earnings Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
CGNX Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
CGNX's stock price declined 5.67% in the past month and is currently leaning towards the lower end of the 52-week range of USD 67.97 to USD 101.82. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 41.52. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 96.10.
Considering the company's growth prospects, solid margins, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 79.97, up 0.81% as of November 19, 2021.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
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 and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.