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From healthcare to finance, manufacturing to entertainment, artificial intelligence (AI) is shaking up industries, driving innovation, and turning traditional business models on their heads. At the core of this revolution is the semiconductor industry, as specialized chips provide the powerhouse behind the massive AI-driven demand for computing power and data processing capabilities.
Micron Technology (MU), a veteran player in the semiconductor industry, has enjoyed a notable surge in its stock price, with a year-to-date increase of 38% through the end of Q1. This strong performance comes amidst a transformative period in the semiconductor industry, as the AI revolution takes center stage. The company's strategic partnerships, particularly with Nvidia (NVDA), have positioned it well to capitalize on the multi-year growth opportunity in AI infrastructure spending
In light of these factors, the question arises: after such a steep increase in its stock price already, is Micron Technology stock still a buy? The answer to this question requires a careful consideration of the company's recent performance, market trends, and the insights provided by financial analysts and industry experts.
Analyzing Micron Technology Stock's Surge
Micron Technology, Inc. (MU) is a legend in the world of innovative memory and storage solutions, serving up essential tech for industries like computing, networking, and mobile communications. They create top-notch memory and storage products, including DRAM, NAND, and NOR flash memory (which is pretty cool, if you're into tech!).
Since the start of 2024, Micron's stock has been on a tear. The stock is up more than 38% year-to-date - and with a 52-week gain of 98.8%, MU has very nearly doubled in value over the past year.
A major catalyst behind the Micron rally is the company's solid financials. For fiscal Q2 2024, just released on March 20, Micron reported revenue of $5.82 billion - up from $4.73 billion in Q1, and much improved from $3.69 billion last year. Plus, they swung back into the black, reporting GAAP net income of $793 million, or $0.71 per diluted share, and non-GAAP net income of $476 million, or $0.42 per diluted share.
Micron is also rewarding its shareholders with dividends. Currently at $0.46 per share on an annualized basis, that shakes out to a forward yield of 0.39% - not too generous, but not too bad for an AI-fueled semiconductor company.
With a forward price/sales ratio of 5.37, Micron stock isn't particularly cheap at current levels - though it trades at a significant discount to rivals like Texas Instruments (TXN), which is valued at roughly 10x forward sales.
What's Driving Growth at Micron?
Micron Technology's outperformance in the market isn't driven by hype; it's built on some solid moves that have set the company up for some serious growth. Take, for example, Micron's recent team-up with Samsung for the Galaxy S24 series. This move incorporates some cool AI-powered features into consumer mobile devices, which should help drive further gains.
Then there's Micron's play in China. On March 23, Micron CEO Sanjay Mehrotra had a sit-down with China's Minister of Commerce - and it went well. The Chinese government is said to be in favor of Micron stepping up its operations in the country, which is a key piece of news as the world's second-biggest economy cracks down on U.S. chipmakers.
Another plus for Micron is how well they're meshing with Nvidia's booming AI biz. As Nvidia keeps growing its AI projects, the demand for the kind of high-performance memory products Micron makes is expected to shoot higher. This could mean more sales and cash for Micron as they supply the essential chips for Nvidia's AI tech.
MU: Earnings Outlook and Analyst Ratings
Looking into the future, analysts are expecting Micron to swing to full-year profitability in fiscal 2024, with EPS rising to $5.82 in fiscal 2025. Revenue is projected to rise 58% this fiscal year to $24.57 billion, followed by 39% top-line growth in fiscal 2025.
When it comes to what analysts think about Micron's stock, the vibe is overwhelmingly positive. Citi analyst Christopher Danely recently raised his price target on Micron from $95 to $150, implying a potential upside of approximately 27% from current levels. Danely's confidence in the Micron story stems from the company's strong positioning to benefit from the rapid expansion of AI, plus its strategic collaboration with Nvidia to distribute high-bandwidth memory (HBM) alongside their GPUs.
And that was before Micron's quarterly earnings report. After the well-received Q2 report, Hans Mosesmann of Rosenblatt lifted the stock's price target all the way to $225, a new Street-high forecast that represents a premium of 90.8% to Thursday's close.
Out of 28 analysts throwing in their two cents, a whopping 24 of them are saying Micron is a "Strong Buy." Another two are leaning towards a “Moderate Buy,” one is sitting on the fence with a “Hold,” and just one analyst thinks it's a “Moderate Sell.”
The Bottom Line on Micron Stock
To sum it up, Micron's riding high on the AI wave, and showing off its legacy chops in the semiconductor game. With solid earnings numbers, a strong revenue outlook, some high-profile partnerships, and ambitious forecasts from analysts, Micron's looking like a hot pick in the still-booming AI space. Sure, it's had a good run lately, but the gauge check says there's more gas in the tank. For folks eyeing tech investments, Micron's still flashing a “Strong Buy” sign.
On the date of publication, Ebube Jones 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.
