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Valued at a market capitalization of $120.6 billion, Micron (MU) is among the largest semiconductor stocks in the world. The chip maker went public four decades back and has since returned close to 8,000% to shareholders after adjusting for dividends. However, given the cyclicality associated with the semiconductor sector, Micron’s returns have been quite volatile.
For example, Micron’s sales rose from $16.19 billion in fiscal 2015 to $30.75 billion in fiscal 2022. However, revenue then fell to $15.5 billion in 2023 before improving to $25.1 billion in 2024. Today, MU stock trades over 30% below all-time highs, trading in line with the broader market in 2024.
But if the tech stock beats consensus estimates during its Dec. 18 earnings report and offers better-than-expected guidance, shares could hit new record highs.
What to Expect From Micron In Fiscal Q1
Analysts tracking Micron expect it to report revenue of $8.71 billion in fiscal Q1 with adjusted earnings per share of $1.77. In the year-ago period, it reported revenue of $4.73 billion and a loss per share of $0.95.
Notably, Micron stock surged by more than 10% after the memory chip manufacturer provided strong guidance for fiscal Q1 in its last earnings call. It projected Q1 sales at $8.7 billion with gross margins of 39.5%, above estimates of $8.28 billion and 39.5%, respectively.
Like other chip stocks, Micron benefits from strong demand for artificial intelligence as it is among the three companies that provide high-bandwidth memory (HBM) chips. These chips are used in Nvidia’s (NVDA) AI processors and are sold out through 2025 with contractual pricing agreements.
Micron CEO Sanjay Mehrotra highlighted that strong data center customer demand and healthy inventory levels would drive top-line growth over the next 12 months. Mehrotra emphasized that the AI boom is helping offset weakness in legacy markets such as personal computers and smartphones. The company also projects that DRAM requirements for AI-powered computer devices will be 30% higher, which could be another long-term catalyst for Micron.
As an early reporter in the semiconductor sector, Micron's results often signal broader industry trends, making a positive outlook significant for the chip sector.
Is Micron Stock Undervalued?
Micron Technology delivered strong fiscal Q4 results, with revenue reaching $7.8 billion, up 93% year-over-year. The memory chip maker demonstrated significant improvement across all key metrics, with DRAM revenue jumping 93% year-over-year to $5.3 billion and NAND revenue achieving a quarterly record of $2.4 billion.
The company's performance was particularly strong in strategic segments, with data center server DRAM hitting record quarterly revenue, driven by high-capacity solutions and HBM production ramp-up. Further, Micron’s automotive segment achieved its fourth consecutive year of record sales.
Profitability showed marked improvement, with non-GAAP gross margin reaching 36.5% in Q4, up over eight percentage points sequentially. Micron generated $3.4 billion in operating cash flows, which allowed it to allocate $300 million towards buybacks.
Looking ahead, Micron expects further gross margin improvement in Q1 fiscal 2025, driven by better pricing and portfolio mix. With $9.2 billion in cash and investments and improving market conditions, the company appears well-positioned for continued growth in the coming fiscal year.
Analysts tracking Micron expect adjusted earnings to expand from $1.30 per share in fiscal 2024 to $12.58 per share in 2026. So, priced at 8x forward earnings, Micron stock trades at a cheap multiple, given strong growth estimates.
Out of the 29 analysts covering Micron stock, 25 recommend “Strong Buy,” two recommend “Moderate Buy,” one recommends “Hold,” and one recommends “Strong Sell.” The average target price for MU stock is $149.37, indicating upside potential of almost 40% from current levels.
