MU – Market expectations are for Uniform ROA to fall, and management may have concerns about product launches, technology improvements, and growth

April 29, 2022

  • Micron Technology, Inc. (MU) currently trades well below corporate and recent averages relative to Uniform earnings, with a 7.2x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to fade to near cost-of-capital levels, accompanied by 7% Uniform asset growth.
  • Meanwhile, analysts expect Uniform ROA to improve to 17% in 2023, accompanied by 7% Uniform asset growth.
  • If sustained in perpetuity, would imply a stock price closer to $269, representing significant equity upside for the firm. That said, the firm is unlikely to sustain peak-cycle returns given the volatile nature of semiconductors
  • That said, the firm’s most recent earnings call suggests management may have concerns about product launches, technology improvements, and growth.

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