Wednesday, 9 September 2015

Valuation - Buy Micron Now

Micron Technology, Inc. (NASDAQ: MU)
Technology; Memory Chips; 75%-100% Upside

Assumptions:
  • EPS is assumed to grow at CAGR of 10% during 2016-2020 despite a consensus of 15%. Zero growth is assumed in perpetuity
  • Earnings are assumed to increase total cost of equity.
  • CAPM is used to calculate the cost of equity. S&P 500 is used as a proxy for the return on market.




Observation: The stock lost around 32% of its value  during the last three month. However, the EVA based valuation  indicates that the market may be over reacting. The stock has the ability to touch $40, translating into more than 100% upside.