Foolish Forecast: Mighty Mite Micron

Computer memory maker Micron Technology (NYSE: MU) will report third-quarter earnings Thursday night. Holding memory-related stocks has not been much fun for a couple of years -- is the turning point here yet?

What Fools say:
Here's how Micron's Motley Fool CAPS rating stacks up against some of its peers and competitors:

Company	Market Cap (billions)	Trailing P/E Ratio	CAPS Rating
Micron	$5.63	N/A	***
SanDisk (Nasdaq: SNDK)	$4.69	21.1	****
Tessera Technologies (Nasdaq: TSRA)	$0.82	22.9	***
STEC (Nasdaq: STEC)	$0.65	111.4	**
SMART Modular Technologies (Nasdaq: SMOD)	$0.23	9.4	*****

Data taken from Motley Fool CAPS and Yahoo Finance on June 25, 2008.

CAPS All-Star player camistocks thinks that "we have seen the lows in the current cycle for semiconductors. Buy them now while everything seems gloomy and sell them in 1-2 years when earnings will be just fabulous." Most of our bullish players heap praise on an undervalued industry rather than on Micron as an individual operator.

What management does:
It can be very, very difficult to grow sales in a commodity business that experiences dramatic cuts to average selling prices nearly every month. Forget about generating cash or GAAP profits. With that said, the worst of this lengthy oversupply situation may be over.

Margins	11/06	3/07	5/07	8/07	11/07	2/08
Gross	24.5%	25.7%	21.9%	19%	11.3%	4.3%
Operating	3.3%	2.9%	(1.6%)	(5.1%)	(11.1%)	(16.5%)
Net	8.5%	3.8%	(1.7%)	(5.6%)	(12.2%)	(25.3%)
FCF/Revenue	(3.2%)	(29.4%)	(40.9%)	(46.9%)	(43.7%)	(34.7%)

Y-O-Y Growth	11/06	3/07	5/07	8/07	11/07	2/08
Revenue	9.2%	15.2%	9.1%	7.9%	4.7%	(0.3%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
To borrow some insight from a Wall Street professional, Doug Freedman of American Technology Research (which has an "outperform" CAPS rating on Micron) says that the DRAM market has reached balance between supply and demand, while the flash memory situation "is tracking six months behind the DRAM supply correction" and thus should become sane again in the near future.

That's great news for Micron and for patient shareholders with an investment horizon on the scale of years rather than weeks. All the bad news and deteriorating product prices appears to have been priced into the stock already, and Micron shares are around 40% cheaper today than they were a year ago. If Freedman is right, as recent reports from suppliers of semiconductor manufacturing infrastructure indicate, this could be a great time to buy memory stocks -- like Micron.

Copyright © 2008 Universal Press Syndicate.