MU – Base Case CDS 53bps, Base Case iCDS 24bps, Negative Case iCDS 30bps, 2029 6.750% Bond YTW of 5.195%, iYTW of 4.666%, Baa3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
February 3, 2025
- Cash bond markets are slightly overstating credit risk with a YTW of 5.195% relative to an intrinsic YTW of 4.666%. Meanwhile, Moody’s is overstating MU’s fundamental credit risk with its Baa3 credit rating, two notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly negative signals for credit holders. As a positive, management members are material owners of MU equity relative to their annual compensation, indicating they may be aligned with shareholders to pursue long-term value creation for the company.
- Earnings Call Forensics™ of the firm’s Q1 2025 (12/18/2024) earnings call highlights that management is confident their operating expenses decreased in Q1 because of lower labor costs and ongoing expense control initiatives and their earnings per share is up over 51% quarter over quarter. In addition, they are confident they will have tight DRAM inventory in 2025 supported by strong shipments.
