Memory demand is surging in 2024 as key players in the tech industry, including semiconductor manufacturers, smartphone OEMs, and personal computer makers, focus on ramping up production of memory chips. This effort is geared towards powering the latest advancements in artificial intelligence (AI), generative AI smartphones, and cutting-edge AI-enabled PCs.
Amid this soaring demand, Micron Technology (NASDAQ: MU) is witnessing rapid growth in both revenue and earnings. Despite this positive trend, Micron’s stock has recently faced a significant decline, dropping 40% from its peak in mid-June, even as the company reports impressive financial results. This downward trend can be largely attributed to a broader market pullback in the semiconductor sector, with the PHLX Semiconductor Sector index experiencing a 16% drop.
Various challenges have contributed to this downturn, notably potential trade restrictions affecting equipment shipments to China, uncertainty surrounding the upcoming U.S. elections, and economic health concerns. However, despite these obstacles, other major players in the semiconductor space, such as Nvidia, Marvell Technology, and Broadcom, have seen their results exceed expectations.
Investors are keenly anticipating Micron Technology’s fiscal 2024 fourth-quarter results, set to be announced on September 25. Here’s a deeper dive into the factors that may lead to impressive results from Micron.
The Memory Market’s Resilience Bodes Well for Micron
According to TrendForce, a reputable market research firm, the dynamic random-access memory (DRAM) sector exhibited a remarkable 25% revenue growth on a quarterly basis in the second quarter of 2024. This upward trend signifies that Micron and its competitors are experiencing heightened demand, evidenced by an increase in shipments throughout the quarter. Importantly, the average selling price (ASP) for DRAM has also risen, showcasing the market’s robust demand outpacing supply.
Micron Technology has projected a revenue of $7.6 billion for its fourth quarter (concluding in August), marking a promising sequential increase of 12%. Given TrendForce’s indication that the growth rate across the DRAM sector is likely to outpace Micron’s estimates, expectations are high that the company may outperform its guidance in the upcoming results announcement.
On a year-over-year basis, Micron’s revenue guidance suggests a staggering 90% increase. With adjusted earnings per share (EPS) anticipated to reach $1.08, Micron aims for a significant rebound from a loss of $1.07 per share recorded in the same quarter last year. The favorable conditions in the DRAM industry further indicate that Micron could exceed its estimates.
Moreover, the price of NAND flash memory also rose in the second quarter of 2024, resulting in a 14% rise in revenue. Micron investors can expect continued positive developments, as NAND flash prices are forecasted to increase between 5% and 10% in the third quarter.
With this optimistic framework, Micron appears well-positioned to announce strong results, complemented by an anticipated revenue of $8.55 billion in the first quarter of fiscal 2025—a sequential rise of 12.5%. The expected price increases for DRAM and NAND flash further bolster the notion of Micron’s solid growth trajectory.
An Attractive Investment Opportunity
The recent significant decline in Micron Technology’s stock price has led to attractive valuation metrics, particularly a low price-to-sales ratio of 4.5 and a forward price-to-earnings ratio of 10. Given Micron’s impressive growth forecast, this presents a unique buying opportunity for investors. The semiconductor industry is projected to continue its upward trajectory, making Micron not only a compelling short-term investment but also a solid long-term play.
With the global memory market expected to generate $360 billion in revenue by 2029—up from just $136 billion in 2022—investors have a chance to capitalize on a growth story that looks set to unfold over the coming years. Buying Micron at its current valuation could be especially lucrative, especially if the company delivers a strong earnings report on September 25, which could potentially ignite a stock rally.
Consider This Before Investing
While Micron Technology shows tremendous promise, it is essential for investors to do their due diligence. The Motley Fool’s Stock Advisor team has highlighted ten stocks believed to offer exceptional growth potential—Micron did not make the list. However, carefully evaluating Micron’s potential, given the current market landscape and industry growth prospects, could be beneficial.
In conclusion, Micron Technology stands at a pivotal moment, driven by a rapidly growing memory market and the persistent demand for memory chips tailored for AI applications. As investors brace themselves for the upcoming earnings announcement, those looking to seize growth opportunities should keep an eye on this fascinating stock and consider the implications of its upcoming performance.