Micron (MU) is a top technology company in the semiconductor segment. It is a large manufacturer of Dynamic Random-Access Memory (DRAM), NAND, and NOR memory chips, which are used in most technology sectors. It does that through its Micron and Crucial brands.
NAND memory refers to re-writable semiconductor storage devices, commonly used in SSDs for data centers, computers, and smartphones. DRAM devices have low latency and provide high-speed data retrieval characteristics. NOR, on the other hand, are rewritable semiconductor devices that provide fast read speeds.
Micron has a substantial market share in the DRAM market, competing with companies like Samsung and SK Hynix. It also competes with companies like Kioxia and Western Digital.
Micron is benefiting from the growth of key industries like artificial intelligence, cloud computing, and machine learning.
Its stock has dropped by over 34% from its highest point this year as concerns about the slowdown in AI remain. It was trading at $102 while its HypeIndex figure has risen to 89%.
Positive hype
Micron’s business has done well because of the rising artificial intelligence (AI) demand as evidenced by Nvidia’s growth. Companies like Microsoft, Google, and Amazon are spending over $200 billion in AI investments, which will benefit Micron and other firms.
Its revenue has bounced back after falling from $30 billion in 2022 to $15.5 billion in 2023. It soared to $25.1 billion last year, and analysts expect that the annual figure will hit $38 billion and $45 billion in 2024 and 2025.
Micron’s fourth-quarter revenues surged to over $7.7 billion from the $6.8 billion it made in the same period last year.
It has also continued growing its margins. Gross margins rose from minus 9.1% in FY’23 to 22.4% in FY’24.
The company issued a robust forward guidance, which showed that its Q1 revenue will be over $8.7 billion while its gross margin will rise to 38.5%.
Analysts are upbeat about Micron as demand for its products rises. The average stock estimate by analysts is $142, about 40% above the current level.
Micron also has a solid balance sheet with over $8.1 billion in cash and short-term investments against total debt load of over $11 billion.
It is also relatively undervalued since it trades at a forward P/E ratio of 12.75, much lower than the industry average of 30.
Technically, the stock has formed a double-bottom pattern at $85, pointing to a potential comeback.
Negative hype
Micron’s business could struggle as signs show that the AI industry is starting to moderate.
Its inventory levels are rising, which could hurt its margins in the future. Total margins rose to over $8.8 billion in the last financial report. It had $5.5 billion in inventories in 2020.
If Donald Trump wins the upcoming general election, Micron could become a victim of the anticipated trade war. He has vowed to be tougher on China than Joe Biden.
There are concerns about the company’s competition from the likes of SK Hynix and Samsung.
Summary on Micron stock
Micron is a quality blue-chip company that competes with a small number of large companies. It is set to benefit from the ongoing AI investments and the rebounding PC and smartphone sales.
On the daily chart, the stock has formed a double-bottom pattern at $85. It has also moved back above the 200-day and 50-day Exponential Moving Averages (EMA), meaning that it has invalidated the death cross pattern that formed in September.
Therefore, a contrarian case for Micron can be made. In this, more upside will be confirmed if the stock rebounds and rises above $114.50, its highest level on September 26.
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