Micron Technologies
Wall Street analysts have a problem with credibility, but they also pump up stock prices, which is beneficial for the average investor.
This phenomenon was displayed Tuesday when a price-target increase for Micron Technology helped push the stock higher.
Shares of Micron closed at $53 on Monday and traded for only 4.9 times the consensus earnings estimate of $10.91 a share for the next 12 months, among analysts polled by FactSet. That was the cheapest valuation, by far, among S&P 1500 companies in the semiconductor or electronic-production-equipment industries.
Stifel analyst Kevin Cassidy increased his price target for Micron’s shares to $101 from $95. Even if the shares were to shoot up to $101, they would trade for only 9.3 times the current earnings estimate, compared with 18.6 for the S&P 1500 information technology sector and 16.6 for the entire S&P 1500. (The S&P 1500 is made up of the S&P 500 the S&P 400 Mid-Cap and the S&P 600 Small-Cap Index )
We also recently bashed sell-side analysts for having so few “sell” ratings and for helping companies set up so many earnings “beats” quarter after quarter. But if the analysts tend to underestimate earnings, it underscores how cheap Micron’s shares are.
And Micron’s not the only one. Here are the 10 cheapest S&P 1500 stocks in the semiconductor and electronic-production industries (which all have customers among semiconductor manufacturers) as of the close on May 14, along with comparisons of their most recent quarterly sales per share from a year earlier.
| Company | Ticker | Industry | Price/ consensus earnings estimate for next 12 months | Increase in quarterly sales per share | Total return - 2018 through May 10 | Total return - 3 years | Total return - 5 years |
| Micron Technology Inc. | MU | Semiconductors | 4.9 | 48% | 28% | 94% | 387% |
| Ultra Clean Holdings Inc. | UCTT | Electronic Production Equipment | 8.0 | 39% | -22% | 198% | 191% |
| Electro Scientific Industries Inc. | ESIO | Electronic Production Equipment | 9.2 | 110% | -8% | 255% | 93% |
| Xperi Corp. | XPER | Electronic Production Equipment | 9.3 | -3% | -13% | -41% | 19% |
| Lam Research Corp. | LRCX | Electronic Production Equipment | 11.4 | 39% | 11% | 176% | 358% |
| FormFactor Inc. | FORM | Electronic Production Equipment | 11.7 | -10% | -16% | 55% | 157% |
| Kulicke & Soffa Industries Inc. | KLIC | Electronic Production Equipment | 11.9 | N/A | -2% | 76% | 106% |
| Advanced Energy Industries Inc. | AEIS | Electronic Production Equipment | 12.0 | 32% | -2% | 161% | 268% |
| Applied Materials Inc. | AMAT | Electronic Production Equipment | 12.1 | 30% | 9% | 195% | 304% |
| Broadcom Inc. | AVGO | Semiconductors | 12.7 | 33% | -5% | 108% | 679% |
| Source: FactSet | |||||||
No sales per share figures are yet available for Kulicke & Soffa Industries. The company said it’s financial results for the quarter ended March 31 would be delayed because it was continuing to investigate “misstated warranty accruals made in prior periods.” A potential restatement of financial results is never a good sign for any company or its stock. Kulicke & Soffa previously said its “consolidated financial statements for the fiscal year ended September 30, 2017 can no longer be relied upon due to the misstated warranty accruals made in prior periods.” But it also said on May 10 that for the quarter ended March 31, net revenue had increased 11.1% from a year earlier.
We have looked at increases of sales per share, rather than raw revenue, because the per-share numbers incorporate any dilution from the issuance of additional shares, as well as any lowering of share counts from buybacks.
A stock screen is only a first-look at a group of companies. If you are considering a long-term play, you need to do your own research to help you form your own opinion about whether a company’s strategy will enable it to continue to deliver goods and services competitively.
Semiconductor stocks have shown tremendous short-term volatility, as you can see on the table. But the demand for microprocessors shows no sign of slowing.