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Buy Soaring Micron (MU) Stock as a Semiconductor Market Play?
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Micron (MU - Free Report) shares lagged the broader semiconductor space during the early months of the coronavirus comeback. But the memory chip maker’s fortunes changed at the end of the summer, with MU stock up 70% since mid-August to crush its industry and the broader tech market.
Micron hit new highs last week after it raised its quarterly guidance for its Q1 fiscal 2021 financial results that are due out on January 7.
Memory Comeback?
Micron is one of the largest makers of DRAM and NAND memory chips in the world. And it’s worth quickly understanding the basics here. DRAM chips are key components within PCs and servers, while NAND flash chips are crucial to smartphones and solid-state hard drives.
MU had been hurt by pricing for over a year, within the historically cyclical semiconductor space. Investors should also know that Wall Street treats the memory space more like a commodity. This makes Micron even more susceptible to DRAM and NAND prices than many other areas of the complex and integrated semiconductor market.
Luckily for Micron and MU investors, cyclical often industries turn around and the firm was correct when it said that Q1 of FY20 was “the cyclical bottom for our financial performance.” The memory chip maker’s Q2 downturn was smaller and it then posted 14% top-line growth in Q3 and 24% revenue growth last quarter.
The Boise, Idaho-headquartered firm topped our Q4 estimates at the end of September, with its DRAM unit, which accounts for around two-thirds of its business, up nearly 30%.
CEO Sanjay Mehrotra said in prepared remarks that “strong DRAM sales in cloud, PC and gaming consoles and an extraordinary increase in QLC NAND shipments” helped drive its growth. “We look forward to improving market conditions throughout calendar 2021, driven by 5G, cloud and automotive growth, and we are excited by the continued momentum in our product portfolio.”
Other Fundamentals
Micron stock has crushed the broader semiconductor space over the last five years, up 400% vs. 230%. However, the stock had hit a rough patch for several years during this run, and it didn’t start to turn things around until this summer. As we mentioned up top, MU stock has surged 70% since mid-August and 40% since the start of November vs. its industry’s 20% and chip standout Nvidia’s (NVDA - Free Report) 8%.
MU closed regular trading Monday at $72.61 a share, which puts it just off the new highs it touched on Friday. This recent run has raised Micron’s valuation to its highest levels in years in terms of forward sales at 3.2X. That said, given the memory space’s commodity-like standing, this still marks a solid discount to the industry’s 4.9X average.
Moving on, our current Zacks estimate calls for the MU’s adjusted Q1 FY21 EPS figure to surge 46% to $0.70 per share on 10% stronger revenue. Longer-term, Micron’s fiscal 2021 revenue is set to jump 11.4% to $23.9 billion, with FY22 projected to climb another 20% higher to reach $28.6 billion. MU’s adjusted earnings are projected to surge by 28% and 78%, respectively.
Bottom Line
Micron raised its quarterly guidance on December 1, which boosted its overall earnings outlook in a big way, as the nearby chart showcases. This recent strength helps MU grab a Zacks Rank #1 (Strong Buy) right now, alongside its “A” grade for Momentum in our Style Scores system.
MU’s overall outlook appears strong and it might be able to continue its climb over the long-haul, even if it faces periods of significant declines. That said, some investors might want to hold off for now given its white-hot run.
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Buy Soaring Micron (MU) Stock as a Semiconductor Market Play?
Micron (MU - Free Report) shares lagged the broader semiconductor space during the early months of the coronavirus comeback. But the memory chip maker’s fortunes changed at the end of the summer, with MU stock up 70% since mid-August to crush its industry and the broader tech market.
Micron hit new highs last week after it raised its quarterly guidance for its Q1 fiscal 2021 financial results that are due out on January 7.
Memory Comeback?
Micron is one of the largest makers of DRAM and NAND memory chips in the world. And it’s worth quickly understanding the basics here. DRAM chips are key components within PCs and servers, while NAND flash chips are crucial to smartphones and solid-state hard drives.
MU had been hurt by pricing for over a year, within the historically cyclical semiconductor space. Investors should also know that Wall Street treats the memory space more like a commodity. This makes Micron even more susceptible to DRAM and NAND prices than many other areas of the complex and integrated semiconductor market.
Luckily for Micron and MU investors, cyclical often industries turn around and the firm was correct when it said that Q1 of FY20 was “the cyclical bottom for our financial performance.” The memory chip maker’s Q2 downturn was smaller and it then posted 14% top-line growth in Q3 and 24% revenue growth last quarter.
The Boise, Idaho-headquartered firm topped our Q4 estimates at the end of September, with its DRAM unit, which accounts for around two-thirds of its business, up nearly 30%.
CEO Sanjay Mehrotra said in prepared remarks that “strong DRAM sales in cloud, PC and gaming consoles and an extraordinary increase in QLC NAND shipments” helped drive its growth. “We look forward to improving market conditions throughout calendar 2021, driven by 5G, cloud and automotive growth, and we are excited by the continued momentum in our product portfolio.”
Other Fundamentals
Micron stock has crushed the broader semiconductor space over the last five years, up 400% vs. 230%. However, the stock had hit a rough patch for several years during this run, and it didn’t start to turn things around until this summer. As we mentioned up top, MU stock has surged 70% since mid-August and 40% since the start of November vs. its industry’s 20% and chip standout Nvidia’s (NVDA - Free Report) 8%.
MU closed regular trading Monday at $72.61 a share, which puts it just off the new highs it touched on Friday. This recent run has raised Micron’s valuation to its highest levels in years in terms of forward sales at 3.2X. That said, given the memory space’s commodity-like standing, this still marks a solid discount to the industry’s 4.9X average.
Moving on, our current Zacks estimate calls for the MU’s adjusted Q1 FY21 EPS figure to surge 46% to $0.70 per share on 10% stronger revenue. Longer-term, Micron’s fiscal 2021 revenue is set to jump 11.4% to $23.9 billion, with FY22 projected to climb another 20% higher to reach $28.6 billion. MU’s adjusted earnings are projected to surge by 28% and 78%, respectively.
Bottom Line
Micron raised its quarterly guidance on December 1, which boosted its overall earnings outlook in a big way, as the nearby chart showcases. This recent strength helps MU grab a Zacks Rank #1 (Strong Buy) right now, alongside its “A” grade for Momentum in our Style Scores system.
MU’s overall outlook appears strong and it might be able to continue its climb over the long-haul, even if it faces periods of significant declines. That said, some investors might want to hold off for now given its white-hot run.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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