MU Earnings Today

kmiklas

kmiklas

I'm considering an earnings play on Micron Technologies (nasdaq:MU) today.

So, let's start with the balance sheet from last quarter--their fiscal year end and annual report--below.

mu_statement1.png

(Ref: 10-Q filing pg 29)
http://investors.micron.com/secfiling.cfm?filingID=723125-16-269

Some things jump out:

1. Net sales down by about 25%
2. Margin decreased by about 40%
3. Debt increased by about 33%

Sales are down, profits on what sales they have are getting thinner, they took on a lot of new debt. Hmm...

Thoughts:
1. There seems to be a general slowdown in tech. CSCO, ORCL, ACN, all throttling back their forward guidance.
2. MU seems to be heavily dependent on INTC... and both the enterprise and retail markets are showing less demand for data center servers and PCs.
3. Their acquisition of Inotera memories acconts for the increase in long-term debt, but the decrese in net revenue... that's a bit troubling, no?
4. Some say that Inotera profits will be part of the earnings for this quarter, but I'm not entirely convinced.
https://www.bloomberg.com/news/arti...agrees-to-buy-rest-of-inotera-for-3-2-billion
http://www.fool.com/investing/2016/12/19/what-to-expect-when-micron-reports-earnings-on-wed.aspx

So, right now, I stand short... but one thought makes me nervous: Did they play that accounting game in 2016 where they show a loss for the year, so that they can apply the tax benefit to previous/upcoming years? They last showed a loss in 2012. Perhaps their accounting team recommends showing a loss every three years? As a result, will they come out strong in their first fiscal quarter of 2017, and show a nice profit?

Numbers don't lie.
 
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..add to this, the "Creepy" accounting changes from last quarter... they're cooking the books a bit here:
Micron Rising Despite Creepy Accounting Changes; Bull and Bear Debate Significance
http://blogs.barrons.com/techtrader...ng-changes-bull-and-bear-debate-significance/

...and this article
What to Expect When Micron Reports Earnings on Wednesday
The memory chip company is benefiting from stronger pricing, but earnings have been stubborn about returning to growth.
http://www.fool.com/investing/2016/12/19/what-to-expect-when-micron-reports-earnings-on-wed.aspx

In my book, all this, combined with a bearish retreat both the market and in tech, adds up to crappy guidance.

Short 200.

Let's see what happens.
 
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eganon69 said:
I hope you covered,...
More...
yup... covered up my eyes so that I couldn't see my screen.

It's times like this that remind me how important it is to manage risk. I was tempted to go in for 1000 shares or more, but I kept it at 200. It hurt, but could have been much worse.

Back to the drawing board. I have to figure out where I went wrong, and what I missed.
 
Glad you kept risk low. The chart was just too strong looking. I know you like fundamentals but check out the chart. It has been strong for a while. Whatever the fundamentals say or at least how people interpret the fundamentals both known and unknown information will always be reflected in the chart.
 
kmiklas said:
yup... covered up my eyes so that I couldn't see my screen.

It's times like this that remind me how important it is to manage risk. I was tempted to go in for 1000 shares or more, but I kept it at 200. It hurt, but could have been much worse.

Back to the drawing board. I have to figure out where I went wrong, and what I missed.
More...
I know one thing you missed... you missed ole Eganom;s T/A thread on Micron. Live to fight another day.

I like your line "yeah I covered my eyes so I couldn't see the screen." hahahah Got an out loud laugh.
 
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