Large Cap Companies - Analysis

Today we will focus on a large-cap tech stock. Micron is focused on semiconductors, and it seems to be a good investment if you want to bet on AI. The industry is very volatile keeping that in mind let’s take a deep dive into it.

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Company Overview:

Micron Technology manufactures memory chips, including dynamic random-access memory (DRAM) and NAND flash memory found in solid-state storage drives. Memory products are available for the cloud server, enterprise, client, graphics, and networking markets, as well as for smartphones and other mobile devices; SSDs and component-level solutions for the enterprise and cloud, client, and consumer storage markets; other discrete storage products in component and wafer form; and memory and storage products for the automotive, industrial, and consumer markets.

That was its product offering. Let’s have a look at why it seems to be a stock of the future.

Memory chips have a high potential to grow owing to 5G networks, cloud computing and AI. It’s estimated that a self-driving car produces data around 1GB per second owing to the vast variety of sensors and cameras. Well, there’s more that drove the company’s wealth up in 2021 – semiconductor shortages which made the supply curve go down and the demand curve was rallying due to a recovery in the automotive sector. In the future, with AI driving demands for memory chips if you have a high-risk appetite this is what you should go for!

Enough descriptive text, as an investor you care about the numbers, don’t you?

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Here’s how the stock fared in the past 3 years, see how the stock went up after the pandemic? Chips are a centre of focus these days.

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Courtesy: Simply Wall St

Here’s how the stock is performing recently, with M&As and other things fluctuating the stock prices the recent uptick is owed to this - “Micron Delivers High-Performance GDDR6 Memory for AMD Radeon RX 6000 Series Graphics Cards.” Moore’s law considered chips will improve and so their capability to have faster and more storage. Moore’s law though is debated still holds true.

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Courtesy: Our World in Data

Moore’s law states that the number of transistors on a microchip doubles about every two years, though the cost of computers is halved. That means better chips for a less price and this has held itself true for a long time and seems no stopping down.

Here’s a look into the ratios and what analysts say about the stock

The company is undervalued at $83.03 and should have a fair value of $107.16 per share. More than 20% below. Its P/E ratio is fair enough at 15.8 and below the semiconductor industry of 31.3, this means other companies are paying more for each dollar of their earnings.

It has 18.5% forecasted annual earnings growth. It is nearby the market standard but doesn’t expect anything too significant, especially for its revenue growth which is estimated to be 9.5% per year.

The company has had great earnings for the last year. The company has a healthy financial profile with its short-term assets almost thrice the short-term liabilities and the long-term ones almost 4 times the liabilities. It has been reducing its debts and has considerably reduced its D/E ratio from 66% to 13.6% in the past 5 years. The dividend offered by the company is a meagre 0.5% against the industry average of 1.0%.

The management is experienced, and the current CEO is Sanjay Mehrotra whose compensation has been consistent with the company’s performance over the past year.

With some great numbers and potential to grow is this stock a good investment? Post your analysis on other large-cap stocks down below!

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Since it was a holiday weekend and most of you might have binge-watched something probably on Netflix, let’s take a look at Netflix that is doing fairly well for the past few months. Well, you all might be knowing what services Netflix offers but here’s a list just to make sure you haven’t forgotten something. TV series, documentaries, and feature films across various genres and languages, it also provides DVDs-by-mail membership services. With a market cap of $291.6B, Netflix is the go-to streaming service across the globe.

Let’s take a look at the numbers:

Netflix is having a great business year while focusing on acquisitions like Scanline VFX along with breaking records with its latest releases notably Squid Games. How did it perform in its last earnings? You may check and add your opinion on this thread Netflix Earnings! Here’s what you need to know! - What’s Hot :fire: - Vested Community.

With revenue just above the expectation and a considerable increase in expected profits of $3.18 per share. It has a high P/E ratio of 58.4x as compared to the entertainment industry. While its valuation stands as follows:


Title: Valuation

While it has an earnings per share of $11.4 or $5.1B in total earnings thanks to its 167M global subscriber base, the cable industry has lost 21.9M American households in 2019 alone with the trend rising in 2021. What makes it a go-to option for many users across the globe is its vast variety of content that is personalized with different thumbnails for users. It faces fierce competition that is discussed down below. Jumping back to the numbers again let’s take a look at the future growth of the stock.

Analysts say the earnings growth is 22.6% for the next few years.


Title: Earnings and Revenue Growth Forecast

The earnings are supposed to grow significantly over the next 3 years that is above 20%. The future ROE is forecast to be high in 3 years that is 27.9% whereas the industry is supposed to grow at 10.6%.


Title: Analyst Future Growth Forecast

The past performance is something that we all are aware of. The only heads up over there is the company has a high level of non-cash earnings. The plus points are covered down below
Its profit margin is has increased to 17.6% higher than last year 11.8%. The growth of earnings as compared to the industry is fairly high with competitors feeling the heat. Here are the points that one should note down.


Title: Earnings and Revenue History

Netflix earnings have grown significantly by 50.6% per year over the past 5 years. It has an accelerating growth – over the past year, the growth has increased by 80% which exceeds its 5-year average that is 50.6%. It ranks high against the industry.


Title: Past Earnings and Growth

The ROE is quite high due to the high level of debt it has accumulated.
The financial health of the company in the long term is something that affects the overall health since the short-term assets do not cover the long-term liabilities. The short-term and the long-term assets are $9.4B and $33.2B respectively whereas the short-term and the long-term liabilities are $8.05B and $19.38B respectively.

Talking of the debt the company has a high debt to equity ratio of 52%, the debt also has increased over the past 5 years from 93.5% to 101.2%. The debt is also not covered by the operating cash flow – which should raise some concerns. Netflix is also not a dividend stock.

There is more to add – SWOT and PESTLE analysis and the competitors of Netflix, but that folks are for next time.

Pfizer

This week we will focus on Pharmaceutical/BioTech companies. Everyone across the US has been taking the Pfizer vaccine with 282M vaccine doses administered and having 89% chances of combating the Omicron variant; this stock must be on your watchlist. Should you invest in it? Have a look at these points before taking your call.

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A no brainer, what does Pfizer do?
Pfizer Inc. develops, manufactures, markets, distributes and sells biopharmaceutical products worldwide. In addition, the company is involved in the contract manufacturing business. It serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, individual provider offices, and disease control and prevention centres. The company has collaboration agreements with Bristol-Myers Squibb Company; Astellas Pharma US, Inc.; Myovant Sciences Ltd.; Akcea Therapeutics, Inc; Merck KGaA; Valneva SE; BioNTech SE; Arvinas, Inc.; and Syapse, Inc. Pfizer Inc.


The company’s performance for the past three years

Ok, tell me about the numbers.
The market cap is approximately $310B with revenues of $69.34B and $19.57B. It boasts a P/E ratio of 15.8 and a P/S ratio of 4.5. A P/S percentage signifies how much an investor pays for every dollar of revenue generated for newbies. The current dividend yield is around 3%, with a 44% payout ratio. The numbers seem pretty good and should be for such a huge company. The company’s current price is at $55.2, which is significantly undervalued amongst analysts who say that the stock should have a value of around $91.47.

How does it perform against the market?

P/E ratio vs industry is good at 15.8, the US Pharma industry averages at 21.9. P/E vs market is yet good again, and the market stands at 16.9.

So far, so good, but wait before you click on the buy button on the Vested app.

Future Growth

As suggested by analysts, the earnings are supposed to decline; the decline is expected to be 8.2%, whereas the industry will grow by 11%. That’s from 16 analysts. The future ROE is also likely to decline. Though analysts say to hold the stock and some suggest a buy, notably, none of them asked to sell.

Over the Past

The company has reported good ratios of ROCE, ROE and ROA. That’s some good indication.

The finances

The company’s finances look positive, posting a healthy balance sheet and continuously reducing debt over the last five years from 69.3% to 52.5%; the debt is well covered with its operating cash flow. The dividend? PFE’s dividend (2.9%) is higher than the bottom 25% of dividend payers in the US market (1.34%). With its reasonably low payout ratio (44.3%), PFE’s dividend payments are well covered by earnings. PFE’s dividends in 3 years are forecast to be well covered by earnings (46.5% payout ratio).

That gives you a basic idea of where the company stands and if you should invest or not. Here are the major stakeholders in the company.

The company has been performing at par with the industry across various numbers!

That’s all for now, folks!