Updated from 8:44 a.m. EST
Over the past four trading sessions,
has gone bananas, jumping 35% as investors rush back into technology. But
Credit Suisse First Boston
sees a lot of peels out there on the roadway and advised its investors that the company's fundamentals do not warrant such a move.
Analyst Tim Mahon said he did not see any compelling data points to suggest that Micron should have gained close to $10 since last Wednesday. Quite the opposite, really. Mahon said that recent data suggest that Micron's inventory levels are still quite high, with products made in the first week of January only now making it into the marketplace. That suggests that Micron's inventory levels are at a range of about eight to nine weeks, not a good situation to be in.
Due to the high inventory levels and an increase in Japanese product in the marketplace, Mahon wrote that the company could be starting to dump products at the end of its fiscal year.
"In addition, we have seen evidence recently of original equipment manufacturers dumping excess product out the back door in their attempts to manage inventory levels," he wrote. "We believe this sort of action is very negative for the segment as it shows that customers believe they can buy product at a lower price in the future."
Indeed, Mahon said that this phenomenon was one of the early warning signs of weakness back in August. Meanwhile, chip prices continue to slide, dropping 69% since October and 46% from December.
Credit Suisse First Boston reiterated its hold on Micron, telling investors that the lack of market demand and high inventory levels will continue to plague the company, especially since chip prices continue to slide.
"Without a material and broad-based end-market pick up," the analyst wrote, "we believe it will be impossible for prices to stop declining, let alone start a sustainable rebound."
covered the other major analyst moves in briefs from earlier in the day:
Merrill Cuts Corning Estimate, Sees Broader Industry Slowdown
Whoa, Nellie! CSFB Says Micron Upswing Unwarranted
Lehman Analyst Sees Some Entertainment Companies as Recession-Proof
Siebel Fights Back After Analysts' Body Blows Continue
Goldman's Cohen Boosts Equity Allocation
: UP to buy from hold at Credit Suisse First Boston.
: UP to market outperform from market perform at
: DOWN to market perform from market outperform at Goldman Sachs. The 2001 earnings per share estimate on the company was crushed -- dropped to 45 cents a share from $1.25 a share.
: DOWN to accumulate from neutral at
: DOWN to buy from strong buy at
InterNAP Network Services
: DOWN to hold from buy at Credit Suisse First Boston. It was also cut to hold from strong buy at
: DOWN to market outperform from U.S. Recommended for Purchase List at Goldman Sachs.
: DOWN to buy from strong buy at ING Barings.
: NEW buy at Lehman Brothers; price target: $80.
Third Wave Technologies
: NEW strong buy at Lehman Brothers; price target: $20.
Lehman Brothers analyst Stuart Linde initiated coverage on the entertainment sector in a note to investors, titled "It's Show Time: Positive on Entertainment Sector." That pretty much sums up the whole note, in which Linde started coverage on five companies.
"We believe these companies offer investors a safe haven," he wrote. "Stick with companies that can leverage their brands across multiple platforms and operate low capital expenditure business models."
Linde said that the companies' limited exposure to the advertising market plus growth in entertainment spending would them some recession resistant. The following companies were initiated by Lehman:
- Crown Media Holdings (CRWN) was started at strong buy with a $27 price target. Linde said he liked Crown's family-themed content and estimated that the company could break even in 2003 with subscriber growth would expand by double-digits until 2005.
Walt Disney's (DIS) - Get Walt Disney Company Report broadcasting holdings and the affect slowing gross domestic product growth would have on theme park revenues, Lehman started the blue-chip at buy with a $34 price target. That said, Linde was pleased with the company's five-year outlook, citing strong DVD sales and a rejuvenated theme park division.
Liberty Media Group (LMGA) was named a top pick and started at strong buy. "Liberty is well positioned to participate in the media sector resurgence we foresee over the next 12 months through its portfolio of programming, cable and technology assets," the analyst wrote.
Six Flags (PKS) , the theme park people, was started at strong buy, unlike amusement rival Disney. Given a price target of $28, the company was called a "pre-eminent out-of-home entertainment brand that is recession resistant" by Linde, who said that regional theme parks outperform destination parks when the economy cools.
Viacom (VIA) - Get Viacom Inc. Class A Report was called a top pick, started at strong buy and given a price target of $74 due to its outstanding growth prospects. Earnings growth is expected to come in at 20% annually for the next three years, while free cash flow grows by 25% through 2002 -- giving Viacom an superior edge on competitors. "Viacom is the only media company with dominant positions in every industry segment -- cable, television, radio and outdoor and film production," Linde wrote. "This creates leverage over advertisers and the upper hand over competitors."