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Hype Asset of the Day | April, 3rd, 2023

Updated: Apr 3, 2023



Micron Technology, Inc. (NASDAQ: MU)

Micron Technology, Inc. is an American producer of computer memory and computer data storage including dynamic random-access memory (DRAM), flash memory, and USB flash drives. It is headquartered in Boise, Idaho. Right now, the company is a world leader in memory storage solutions. Micron recently released its most recent report for the fiscal year and this has garnered mixed sentiments, this caused an increase in mentions by a massive 213% prompting investors to wonder what makes Micron so hyped. Currently, Micron shares trade at $59.86 per share.


Positive Hype

There are lots of reasons you should consider taking a position in Micron Technology, here are some of the major ones.


  • Share prices of Micron Technology (MU -4.36%) are up 22% over the last five years, down 40% from their all-time high in early 2022, and up 26% in 2023.


  • Despite a cyclical industry, Micron has delivered a 543% return over the last decade, more than doubling the return of the S&P 500 index, and seems to be geared to power through this current downturn.


  • Micron is benefiting from long-term tailwinds in rising demand for memory and storage chips, and the increasing adoption of artificial intelligence (AI) to train natural language models and recommendation systems could accelerate demand over the next decade.


  • Micron management expects the business to return to sequential growth, Micron is not suffering from lower demand. The company is prepared for the future.


  • Micron's updated outlook calls for a 40% reduction in capital expenditures, with bit supply growth for DRAM expected to be "meaningfully negative."


  • Management noted on the earnings call that the production yields on its 1-alpha DRAM and 176-layer NAND products are the highest in the company's history.


  • The company is also prepared to ramp up its most advanced 1-beta DRAM and 232-layer NAND products, even as it reduces capital spending this year.


  • Micron Technology has also recently been providing shareholders with regular dividends, with the last dividend yield being 0.73%.


Negative Hype

Although there are lots of reasons Micron might be a good investment, it is just as important to see why it might not be as well. Some of the reasons it might not be the best time to invest in Micron right now are as follows.


  • Micron is dealing with the worst industry downturn in 13 years. Management forecasts the next quarter's revenue total will fall 58% year over year.


  • In the most recent quarter, revenue fell 10% over the previous quarter due to a decline in selling prices of memory chips, while there was an increase in total bit volume shipped.


Conclusion

The stock's forward price-to-earnings ratio currently stands at a cheap 6.8 based on this year's consensus earnings estimate. Even on a price-to-book basis, Micron stock is trading toward the lower end of its previous 10-year range. Wall Street is turning more positive. While it might take Micron a quarter or two to return to sequential growth, analysts at BMO Capital and Raymond James give the stock an outperform rating and see an attractive risk-to-reward proposition ahead of a cyclical recovery. Demand is on the verge of exploding, which is a catalyst to lift Micron from its slump. The main risk is a prolonged recovery, so it might make sense to wait for Micron to actually report a revenue increase before buying the stock.


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