This article originally appeared on iknowfirst.com
“I Know First” has had a bullish view on MU for the past 3 months. Just today we were able to reinforce that view with our daily market forecast based on our algorithm, which indicates MU as long core investment.
Equity Profile
Our prediction on Micron (MU) was strongly based on our Algorithm. Our daily forecasts based on machine learning provide us with very accurate predictions on the movements stocks will have within the market and different sectors. I Know First, Ltd. is a financial technology company that provides daily investment forecasts based on an advanced, self-learning algorithm.
Although the semi-conductor business has had some trouble over the past year, we believe this is coming to an end, especially in the case of MU, which after major cost cuts has managed to come back on top.
Insight Into The Semiconductor Sector With A Focus On MU
In June the SOX Index (semiconductor index) was at it’s peak before falling drastically up until August loosing 25%. To date the index has appreciated about 22%, and is now near to flat YTD. We believe this is due to buy-side investors (e.g. hedge funds) strong belief in cost cuts that turned out to be better than feared.
Following negative earnings reports for MU in 1Q, 2Q and 3Q, as well as 20% cumulative CY16 EPS cuts, we are confident that 3Q represented the last round of major spending cuts. In the last downturns (2008 and 2011) we saw the stock react favorably post major rounds of cuts. In fact, MU is already starting to see signs of shipping to consumption levels starting 1H16.
Companies in the sector such as MCHP, TXN, ON, LLTC and MU, which have been disciplined with channel/distributor inventories and shipping below consumption are indicating a return to seasonal trends moving into the 1H of next year. We believe semiconductor companies have started to positively discount this fundamental dynamic, which when combined with an M&A wave in the sector, still in the early stages of unfolding, is a recipe for success. We therefore are recommending semiconductor stocks in general. We believe the sector is in the early phases of pulling out of a mid cyclical downturn, characterized mainly by inventories normalizing with demand trends.
