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Microtechnology could bring macroearnings

Investment from 4,700 USD

Expires: 18/04/2019

Expected
yearly returns
101%

Micron Technology is a large international company specialising in the production of DRAM, NAND, NOR, 3D XPoint, and other semiconductor memory chips. The company's products are used in all spheres; from consumer goods to industrial equipment. The company's main brands include Micron, Crucial, and Ballistix. Revenue in terms of product sales and the provision of related services by product line can be broken down as follows: DRAM 71%, NAND 25%, and the remaining brands account for 4%. Revenue diversification by country can be broken down as follows: China (51.1%), Taiwan (12.5%), Japan (5%), other Asia-Pacific countries (8.9%), the US (13.6%), Europe (6.7%), and others (2.1%). Micron Technology has a history which dates back to 1978, and the company's largest shareholders include BlackRock (6.10%), Goldman Sachs (1.48%), Bank of New York Mellon (1.18%), UBS (1.12%), Soros Fund Management (0.03%), Edmond de Rothschild Group (0.02%).

Growth factors:

  • On the 21st of May, 2018, the Board of Directors announced a new share buyback program worth 10bn USD. Taking into account that the current capitalisation of the company is about 55bn USD, the buyback of shares on the market for the amount of 10bn USD will give a powerful impetus to the growth of their prices.
  • Active development of new innovative products, their production, and successful promotion in international markets. For example, on the 21st of May, 2018, Micron announced the successful completion of a joint project with global industry leader Intel Corporation. The companies presented an innovative 4bits/cell 3D NAND memory card, which provides a higher density (performance, etc.) compared to its predecessor.
  • Successful continuation of the strategy aimed at increasing revenue and reducing costs. The company continues to show rapid growth: in Q1 of 2018 revenue increased by 58.2% (YoY), and over all of 2017 revenue grew by 63.9% (YoY).
  • Continued growth of the already high profit margins: the ratio of net profit to revenue increased to 47% in Q1 of 2018 from 21.3% in the same period of 2017. In Q2 of 2018, profits increased by 249.1% (YoY). The return on equity grew to 49.98% in Q1 of 2018 (from 5.18% in the same period in 2017). The return on assets rose to 27.17% in Q1 of 2018 (from 2.41% in the same period in 2017).
  • Micron Technology's share price is trading with the following discounts compared to peers:
    • 29% in terms of P/E;
    • 23% in terms of EV/EBITDA.
  • Low risks to financial stability: the ratio of total debt to total assets is only 22.58%, the ratio of total debt to EBITDA is a low 0.60, and the ratio of net debt to EBITDA is close to zero at 0.05, due to a significant amount of available liquidity (absolute liquidity ratio - cash ratio - is 1.31, which is a fairly high value).

Investment period ends:
18/04/2019

Expected yield is calculated according to 90% capital protection and the price of the base asset at expiry, equal to 59 USD.

Technical Analysis:

Micron Technology's share prices have been demonstrating an upwards trend since early 2016, and have already broken up the 50-, 100-, and 200-day moving averages and exited the Ichimoku cloud upwards. Significant technical levels: 61.77; 54.14; 49.91; 45.78; 39.50; 34.86; 32.69; 29.70; 26.81; 23.51; 19.18; 14.13; 10; 11.

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