Delaney thinks supply of DRAM will remain “tight” through next year, principally because Micron and its two competitors, Samsung Electronics (005930KS) and SK Hynix (000660KS), have been more restrained in spending on manufacturing DRAM than he would have thought.

"DRAM companies have been more disciplined with capex than we expected (e.g., Applied, Lam, and Tokyo Electron all reported DRAM sales/shipments declined qoq in 2Q17),” writes Delaney, noting that when he had downgraded the stock in May, it was because at that time, “DRAM investment had been rising 40% year over year."

But now, "we believe 2017E industry DRAM capex will be +24% yoy but still below the 2015 peak,” and “pricing is also higher than we expected."

Delaney notes that because of the consolidation of DRAM to three players, the gross profit margin the three are enjoying is higher both in the troughs of memory chip cycles (going back to 2008), and at the peaks — an over-arching change he finds favorable.

Delaney thinks the quarter ended last month, the fiscal Q4, will be about as expected by the Street, but he sees a big beat in fiscal Q1 ending in November, projecting $2.15 cents per share in earnings, versus Street consensus for $1.78.

For the entire fiscal year, he sees $7.80 per share, versus the Street’s $6.14 estimate.

Micron stock today is up 10 cents at $34.69.

By: DocMemory
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