MU - Valens Credit Report - 2022 11 03
Credit markets are overstating credit risk, with a cash bond YTW of 6.265% and a CDS of 150bps relative to an Intrinsic YTW of 4.822% and an Intrinsic CDS of 47bps. Furthermore, Moody's is also overstating MU's fundamental credit risk with its Baa3 credit rating two notches below Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights mostly favorable signals for credit holders. MU's metrics should drive management to focus on all three value drivers; asset efficiency, margin expansion, and revenue growth, which should lead to Uniform ROA improvement and higher cash flows available for servicing obligations. Furthermore, management members are material owners of MU equity relative to their annual compensation, indicating they should be aligned with shareholders to pursue long-term value creation for the company.
Earnings Call Forensics™ of MU's Q4 2022 (09/29/2022) call highlights that management is confident their strategy to design products that allow them to be repurposed will yield benefits and that the capex that they are keeping will prepare technologies to better meet customer qualifications.
Micron Technology provides memory and storage solutions. The company's portfolio of memory and storage technologies include Dynamic Random Access Memory, Not And, 3D XPoint? memory, and Not Or. The company's segments are: Compute and Networking Business, which includes memory products sold into client, cloud server, enterprise, graphics, and networking markets; Mobile Business, which includes memory products sold into smartphone and other mobile-device markets; Storage Business, which includes Solid-State Drives and component-level solutions sold into enterprise and cloud, client, and consumer storage markets; and Embedded Business, which includes memory and storage products.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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