We remain buy-rated on Micron Technology, Inc. (NASDAQ:MU). Management raised guidance for Q1 2024 earlier today from previously guided $4.4B ± $200M to $4.7B and now expects Non-GAAP gross margin to approach breakeven next quarter versus previous guidance of gross margins at minus 4%, ± 200 basis points. We think the better-than-expected guidance for next quarter confirms our expectation of a memory market rebound in 2024 due to improved demand and pricing dynamics. The following outlines MU’s updated guidance for next quarter.
Management noted “improved supply and demand balance and improved pricing” as the drivers behind the higher guidance and, on the UBS Technology conference call, indicated that after forecasts of improved inventories and pricing bottoming out in Q4, management is now seeing “pricing starting to increase.” Tom’s Hardware research confirms more of the same:
“Memory makers are witnessing increasing prices as production reductions lead to price rises in both DRAM and NAND segments.”
The improved pricing is an industry-wide shift after DRAM prices crashed earlier this year, dropping 20% QoQ in Q1 2023 and further in Q2, with DDR5 prices declining more than DDR4 prices. The following graph puts into perspective how bad the price crash was.
We think the cut in production from DRAM industry leaders, including MU, SK Hynix, and Samsung (OTCPK:SSNLF), has aided in creating a more balanced demand-supply dynamic in the back end of the year. Now, DDR4 and DDR5 prices are expected to improve subtly, and the consumer DRAM market is expected to see prices increase, with TrendForce forecasting a price increase of as much as 8% this quarter. Management left a lot unsaid aside from the raised guidance, but we believe this is a classic buy the rumor, sell the news type action with the stock.
Micron stock is trading below the peer group average; given the upside potential with the memory rebound next year, we think the stock is undervalued. The stock is trading at 5.1 EV/C2023 sales versus the peer group average of 5.8x. We see attractive entry points at current levels and recommend investors explore entry points into the stock.
The following chart outlines MU’s valuation against the peer group.
Word on Wall Street
Wall Street shares our bullish sentiment on the stock. Of the 36 analysts covering the stock, 27 are buy-rated, seven are hold-rated, and the remaining are sell-rated. The stock is currently priced at $75 per share. The median sell-side price target is $80, while the mean is $79, with a potential upside of 6-7%. The following outlines sell-side ratings and price targets for MU.
What to do with the stock
We continue to be bullish on Micron Technology, Inc. stock. We see more material upside for the stock in 2024 due to a recovery in demand and pricing for DRAM and NAND, with more emphasis on the former for MU’s outperformance in 2024. We continue to recommend investors explore entry points into the stock on the pullback to ride the upward trend in 2024.
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Let’s talk about Micron stock (NASDAQ:MU). If you haven’t been keeping an eye on this stock, you might want to start now. Micron Technology Inc. is an American multinational corporation that specializes in producing memory and storage solutions for a wide range of devices. With a strong track record of innovation and growth, Micron has become a leading player in the technology industry and its stock is showing no signs of slowing down. In this article, we will explore why Micron stock is a must-buy and how it has the potential for even more upside in the future.
Before we deep dive into the reasons for investing in Micron stock, let’s first understand what makes this company stand out in the competitive tech market. With a market cap of over $100 billion, Micron is a well-established player in the industry. It has been in operation since 1978 and has consistently shown steady growth and resilience even during economic downturns.
Micron’s core business lies in the production of DRAM (dynamic random-access memory) and NAND (non-volatile memory) for various devices such as smartphones, computers, and data centers. These memory and storage solutions are crucial components in our daily lives, making Micron’s products an in-demand commodity. With the increasing demand for data storage and processing, Micron is well-positioned to capitalize on this trend and continue its upward trajectory.
Now, let’s explore the top reasons why Micron stock is a must-buy with even more potential upside in the near future.
1. Strong financial performance:
Micron has been delivering strong financial performance in recent years, which is a reflection of its solid business model and successful execution strategies. In the fiscal year 2021, the company reported a record annual revenue of $31.4 billion, marking an impressive 35% year-over-year growth. This growth was driven by a surge in demand for its memory and storage products, as more people turned to technology for work and entertainment during the pandemic.
Micron also reported a net income of $6.7 billion, with a gross margin of 34.8%. These figures are a testament to the company’s ability to generate profits and maintain a healthy financial standing. With a strong balance sheet, Micron is well-equipped to withstand any potential market volatility and continue its growth momentum.
2. Innovative product portfolio:
Another reason to take note of Micron stock is its innovative product portfolio. The company invests heavily in research and development, leading to the creation of cutting-edge products that cater to the evolving needs of consumers.
One such innovation is the 176-layer NAND technology, which offers higher performance and storage capacities compared to previous generations. Micron’s DRAM solutions also continue to push the boundaries of speed and energy efficiency, making them a preferred choice for data centers and other high-performance computing applications. With a focus on continuous innovation, Micron is well-positioned to stay ahead of the competition and maintain its market dominance.
3. Strong market positioning:
Micron has built a strong market position and has established itself as a trusted brand in the tech industry. It has a diverse customer base, including leading tech companies, which rely on its products to power their devices and services.
Moreover, Micron has a strong global presence, with operations in Asia, Europe, and the U.S. This allows the company to tap into different markets and diversify its revenue streams, reducing its dependence on any single region.
4. Favorable industry outlook:
The market for memory and storage solutions is expected to grow significantly in the coming years, and Micron is well-positioned to benefit from this growth. According to a report by Allied Market Research, the global DRAM market is expected to reach $179.6 billion by 2027, with a CAGR of 6.6% from 2020 to 2027. This projected growth is driven by the increasing demand for cloud-based services, artificial intelligence, and big data analytics, all of which require high-performance memory and storage solutions.
Micron is also investing in other emerging technologies such as 5G and autonomous vehicles, which have the potential to drive further demand for its products. With a well-diversified product portfolio and a strong foothold in the market, Micron is set to ride this wave of growth and deliver strong returns for investors.
5. Positive analyst sentiment:
Lastly, analysts are upbeat about Micron stock, with most maintaining a buy rating and predicting further growth for the company. According to MarketBeat, the consensus among 27 Wall Street analysts is that Micron is a strong buy.
Moreover, the company’s earnings forecast for fiscal year 2022 has been revised upwards, indicating a positive outlook for the stock. With a strong financial standing, innovative product portfolio, and favorable industry trends, Micron stock is a top pick for many analysts and investors.
In conclusion, Micron stock (NASDAQ:MU) is a must-buy for investors looking for long-term growth and a steady stream of returns. With its strong financial performance, innovative products, and a positive industry outlook, Micron is well-positioned to deliver even more upside in the future. As with any investment, it is important to conduct thorough research and consult with a financial advisor before making any decisions. However, given Micron’s track record and promising future, it is certainly a stock to consider adding to your portfolio.