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Micron Technology shares jumped last week as the company forecasted 2024 as the recovery year for the dynamic random access memory (DRAM) and flash storage market, as deliverables are slowly moving to historically normal levels. According to Micron’s CEO, Sanjay Mehrotra, “Memory prices, which slumped this year, will improve next year and rise further in 2025”. This statement gave investors another positive catalyst for the sector.
This optimism led us to screen the sector for high-quality companies with a potential for a comeback and growth. In this article, we’ll run the numbers for a 2024 semiconductor sector play, and explain why we think these three semiconductor companies are good places to start.
Everspin Technologies, Inc. (MRAM)
The first company on our list is Everspin Technologies, Inc., specializing in magnetoresistive random-access memory (MRAM) solutions. The company offers non-volatile memory solutions that help protect its clients' mission-critical data during power failures and interruptions. The company owns a portfolio of technologies that include Spin-transfer Torque MRAM (STT-MRAM) used in NOR Flash, SRAM, and dynamic random access memory (DRAM) applications; MRAM for Serial Peripheral Interface (SPI), industry-standard interfaces, and more. Further, Everspin recently announced the expansion of its flagship offerings for industrial high-density STT-MRAM and EMxxLX, which offer low latency, higher temperature range, and consistent memory output.
Everspin’s third quarter ended with an 8% YoY increase in its revenue and outperformed the company’s guidance alongside its 27.8% increase in net income. The company highlights its quarter success with its new Radiation Hard programs and STT-MRAM technologies, highlighting its strong position in the sector. Its gross margin improved to 60.2% due to heightened licensing revenue.
The company also highlighted maintaining a positive GAAP net income of 10 consecutive quarters. Its new STT-MRAM products, offered in various densities and temperatures, put the company in a solid position to cater to the fast-growing industrial IoT (Internet of Things) and embedded system market. The company maintains a positive outlook for the remainder of its fiscal year. It expects revenue to be between $15.4 million and $16.4 million and its GAAP net income per diluted share to be between $0.01 and $0.06. This consistent performance and strong product portfolio made MRAM one of our top choices for this sector play.
Silicon Motion Technology Corporation (SIMO)
Silicon Motion Technology Corporation is a designer and manufacturer of flash controllers used on solid-state storage devices. Its low-power semiconductor solutions cater to the mobile storage market and OEM (original equipment manufacturers). The company’s mobile storage market operations focus on flash drives, flash memory cards, SSDs, eMMCs, and other expandable storage products. Other offerings include NAND flash controllers and ICs for devices. These products are used in a variety of applications like person personal computers, smartphones, and other devices.
SIMO's latest financials reported a significant increase in its sales and showed signs of recovery. Its eMMC+UFS controller sales indicated a substantial jump compared to its last quarter sales and highlighted its quarterly performance. While its YoY numbers in the latest quarters showed a decrease in performance, critical business areas could still perform well.
The company’s non-GAAP net income increased substantially from the previous quarter, and its CEO underscored that they are now noticing improved OEM order patterns and normalization in their inventory levels, two key drivers behind the growth. Silicon Motion has also invested strategically in storage controllers that expanded its customer base and supported its long-term growth plans. All in all, the company’s consistent diversification efforts to cater to end-market needs and management's optimistic projections tell us that SIMO might be worth a shot.
Micron Technology, Inc.(MU)
The last company in our list is the reason for the sector catalyst themselves, Micron Technology, Inc. Micron is a storage and memory solutions company offering known brands like Crucial and Micron. The company’s operations fall under four main segments: storage business unit segment for its solid state drives and component level solutions; embedded business unit for industrial and automotive storage solutions; networking business segment for its memory, cloud server, and networking products; mobile business unit segment for its smartphone and mobile solutions.
Micron has consistently been at the forefront of technology development. Its latest product announcement about Crucial® T500 Gen4 NVMe® SSD offers a performance-to-power ratio of 40% higher than current offerings and is two times faster than previous Gen3 NVMe SSD offerings.
The company’s latest financials ended with a strong start; revenue increased 15.6%, and operating cash flow soared 48.2% on a YoY basis. While the company reported a net loss in GAAP and non-GAAP numbers per diluted share, the company is very optimistic about the upcoming quarters and the sector's recovery throughout 2024.
Its CEO, Sanjay Mehrotra, highlights that the company’s focus on High Bandwidth Memory for data center AI applications positions it to take advantage of the growing AI market. The company has also raised its forecast for Q2 revenue to $5.30 billion, cementing its optimism. The ongoing adoption of AI into the industry has been a game-changer for companies like Micron, and we simply see this going throttle in the years to come.
Final Thoughts
Just as the tech sector was the primary driver for the S&P 500’s growth in 2023, “sector Plays” offer some of the best returns when timed correctly. Micron's CEO is optimistic for the new year, and maybe we should also be.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
