Two Scenarios That Can Change Our Valuation For Micron

by Trefis Team
-32.90%
Downside
40.39
Market
27.10
Trefis
MU
Micron Technology
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Micron Technology (NYSE:MU) is a manufacturer and marketer of semiconductor devices, primarily dynamic random access memory (DRAM) for PCs and mobile devices, NAND Flash and NOR Flash memory. NAND Flash Memory and Core DRAM Memory constitute around 49% and 48% of our valuation for Micron. Below we discuss key scenarios related to these drivers that present upside or downside opportunities to our current price estimate for Micron:

A) Core DRAM Average Selling Price : We forecast DRAM ASPs for Micron to decline from $0.66 per gigabit in 2015 to $0.24 per gigabit by the end of our forecast period.  Even a slight deviation from our estimate can lead to a significant upside or downside in our price estimate for Micron. One of the reasons for the slowdown in decline could be the ongoing consolidation in the industry, as well as renewed demand from new technology and consumer devices. On the other hand, a continuous decline in PC shipments or higher competition in the DRAM market could accelerate the rate of DRAM price decline. If prices fall to $0.15 over our review period, then there will be an approximate 20% decline in our valuation for Micron.

NOTE: Micron reports the % increase/decrease in DRAM ASP’s in its annual SEC filing.

B) NAND flash market share: We forecast Micron’s market share in NAND flash to increase from 12.6% in 2015 to 14.9% by the end of our forecast period. There would be an approximate 15% upside if the market share increases to 20%. On the other hand, if Micron’s market share declines to 10% there will be a 20% downside in our price estimate. The reasons for an increase in market share could include the acquisition of a competitor or the introduction of more cost competitive products. On the other hand, any delay in introducing new technologies by Micron would give its competitors an edge in innovation and pricing, leading to a possible decline in its market share.

NOTE: We have calculated Micron’s Market Share in NAND Flash Gigabytes as follows:

Micron’s Market Share in NAND Flash Gigabytes = NAND Capacity sold by Micron(GB)*/ Total NAND Flash GB sold Worldwide

*NAND Capacity sold by Micron(GB) = NAND Flash Revenue(Reported)/ NAND ASP(Per GB)

See our complete analysis for Micron here

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