Micron's Meltdown Shouldn't Be a Surprise
Posted at 2:10 p.m. EDT on Friday, June 26, 2015
How in heck was Micron (MU) so revelatory? What did people think would happen? Some sort of magical return to the personal computer market, a demand surge that would keep the Micron ball in the air?
This stock's getting hammered because it has been so long since people have seen what the stock of a commodity product does when supply exceeds demand.
This isn't much different than what happens to the paper companies -- have you seen them? -- when they produce more than demand can bear. I think the big surprise is that Microsoft (MSFT), Intel (INTC), Western Digital (WDC) and Seagate (STX) aren't down more. Only Microsoft has enough build away from the personal computer industry to sustain a lift here, although that note put out by CEO Satya Nadella was hardly reassuring.
It is ironic that if you make commodity parts for cellphones, you are doing fabulously. If you make parts for the video game chain, you are doing well. But PCs? Awful.
Many people on Twitter (TWTR) are asking me if this is the level they should start buying Micron. To which I say, I always need a thesis before I get involved. (Twitter is part of TheStreet's Action Alerts PLUS portfolio.)