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Micron (MU) Plunges 29% in a Month: Should You Buy the Dip?
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Micron Technology, Inc. (MU - Free Report) has seen its stock take a steep dive, plunging nearly 29% in the past month. This sharp decline exceeds the broader market's performance, with the S&P 500 down 5.9% and the Zacks Computer and Technology sector dropping 11%.
The primary culprit behind Micron's recent slump is the broader market sell-off driven by macroeconomic concerns. Investors are increasingly anxious about the Federal Reserve's interest rate policies and the potential for a U.S. recession. The recent disappointing job report from the U.S. Department of Labor has only added fuel to these concerns, heightening fears about the state of the economy.
From reaching a new 52-week high in June, Micron's stock has taken a sharp turn downward. At the closing price of $93.08 as of Aug 9, MU stock trades at approximately 41% below the 52-week high of $157.54 attained on Jun 18.
Given the extent of the pullback, some investors might see this as an opportunity to buy Micron shares at a discount. But is now the right time to jump in? Let's take a closer look.
YTD Price Performance
Image Source: Zacks Investment Research
Positive Industry Trends: A Silver Lining
Despite the recent stock decline, Micron remains a key player in the rapidly growing memory chip industry, which is crucial for GPU-enabled artificial intelligence (AI) servers. The demand for advanced memory solutions is being driven by the increasing integration of generative AI and large language models in data centers. Micron, with its strong position in this space, stands to benefit significantly from these trends.
Moreover, the memory chip industry has seen a better balance between supply and demand in recent quarters. Micron had previously struggled due to inventory adjustments across various markets, but this has improved recently. This shift has led to better pricing for Micron’s Dynamic Random Access Memory (“DRAM”) and NAND products, a trend expected to continue and support the company's financial performance in the near term.
Strength in Portfolio and Partnerships
Micron's diversified product lineup, which includes DRAM and NAND offerings for PCs, servers and smartphones, is a significant advantage. DRAM chips are essential for PCs and servers, while NAND flash chips are crucial for smartphones and solid-state drives. This diversified portfolio not only positions Micron to meet the varied demands of the tech industry but also helps the company secure new deals.
Micron’s next-generation GDDR7 graphics memory, for instance, is currently being tested by Advanced Micro Devices, Inc. (AMD - Free Report) and Cadence Design Systems, Inc. (CDNS - Free Report) . AMD plans to use this memory to create more responsive and realistic games, while Cadence is utilizing it for testing and validating its GDDR7 PHY IP.
Additionally, Micron’s high-bandwidth memory, HBM3E, is set to play a key role in NVIDIA Corporation’s (NVDA - Free Report) latest AI chip, the H200, which is expected to replace the existing H100 chip. Micron has already sold out its HBM chips for 2024, with a significant portion of the 2025 supply already allocated. These strategic partnerships and product innovations underline Micron's crucial role in the tech ecosystem.
Financial Recovery and Strong Outlook
Micron has made a strong recovery from the financial difficulties it faced in late 2022 and early 2023. This turnaround is evident in the company’s recent financial results, where it has consistently outperformed earnings expectations.
Its non-GAAP earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 73.2%. In its third-quarter fiscal 2024 results, Micron not only exceeded the consensus estimates but also showed significant year-over-year improvement. (Read more: Micron Crushes Q3 Earnings & Revenue Estimates, Up Y/Y)
Micron Technology, Inc. Price, Consensus and EPS Surprise
The Zacks Consensus Estimates project robust growth for Micron. For fiscal 2025, revenues are expected to grow by approximately 55% to $38.63 billion, while earnings are forecasted to increase more than eightfold to $9.32 per share. These optimistic projections have led to upward revisions in earnings per share estimates, reflecting positive sentiment around the stock.
Image Source: Zacks Investment Research
Final Thoughts: Buy the Dip
Micron’s steep decline presents a potentially attractive buying opportunity for investors who believe in the long-term growth story of the tech industry. The company’s vital role in AI, strong product portfolio and strategic partnerships make it a compelling investment.
For those with a tech-focused portfolio, now might be a good time to consider adding Micron, as the company stands to benefit from the ongoing demand for high-performance memory and storage solutions.
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Micron (MU) Plunges 29% in a Month: Should You Buy the Dip?
Micron Technology, Inc. (MU - Free Report) has seen its stock take a steep dive, plunging nearly 29% in the past month. This sharp decline exceeds the broader market's performance, with the S&P 500 down 5.9% and the Zacks Computer and Technology sector dropping 11%.
The primary culprit behind Micron's recent slump is the broader market sell-off driven by macroeconomic concerns. Investors are increasingly anxious about the Federal Reserve's interest rate policies and the potential for a U.S. recession. The recent disappointing job report from the U.S. Department of Labor has only added fuel to these concerns, heightening fears about the state of the economy.
From reaching a new 52-week high in June, Micron's stock has taken a sharp turn downward. At the closing price of $93.08 as of Aug 9, MU stock trades at approximately 41% below the 52-week high of $157.54 attained on Jun 18.
Given the extent of the pullback, some investors might see this as an opportunity to buy Micron shares at a discount. But is now the right time to jump in? Let's take a closer look.
YTD Price Performance
Image Source: Zacks Investment Research
Positive Industry Trends: A Silver Lining
Despite the recent stock decline, Micron remains a key player in the rapidly growing memory chip industry, which is crucial for GPU-enabled artificial intelligence (AI) servers. The demand for advanced memory solutions is being driven by the increasing integration of generative AI and large language models in data centers. Micron, with its strong position in this space, stands to benefit significantly from these trends.
Moreover, the memory chip industry has seen a better balance between supply and demand in recent quarters. Micron had previously struggled due to inventory adjustments across various markets, but this has improved recently. This shift has led to better pricing for Micron’s Dynamic Random Access Memory (“DRAM”) and NAND products, a trend expected to continue and support the company's financial performance in the near term.
Strength in Portfolio and Partnerships
Micron's diversified product lineup, which includes DRAM and NAND offerings for PCs, servers and smartphones, is a significant advantage. DRAM chips are essential for PCs and servers, while NAND flash chips are crucial for smartphones and solid-state drives. This diversified portfolio not only positions Micron to meet the varied demands of the tech industry but also helps the company secure new deals.
Micron’s next-generation GDDR7 graphics memory, for instance, is currently being tested by Advanced Micro Devices, Inc. (AMD - Free Report) and Cadence Design Systems, Inc. (CDNS - Free Report) . AMD plans to use this memory to create more responsive and realistic games, while Cadence is utilizing it for testing and validating its GDDR7 PHY IP.
Additionally, Micron’s high-bandwidth memory, HBM3E, is set to play a key role in NVIDIA Corporation’s (NVDA - Free Report) latest AI chip, the H200, which is expected to replace the existing H100 chip. Micron has already sold out its HBM chips for 2024, with a significant portion of the 2025 supply already allocated. These strategic partnerships and product innovations underline Micron's crucial role in the tech ecosystem.
Financial Recovery and Strong Outlook
Micron has made a strong recovery from the financial difficulties it faced in late 2022 and early 2023. This turnaround is evident in the company’s recent financial results, where it has consistently outperformed earnings expectations.
Its non-GAAP earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 73.2%. In its third-quarter fiscal 2024 results, Micron not only exceeded the consensus estimates but also showed significant year-over-year improvement. (Read more: Micron Crushes Q3 Earnings & Revenue Estimates, Up Y/Y)
Micron Technology, Inc. Price, Consensus and EPS Surprise
Micron Technology, Inc. price-consensus-eps-surprise-chart | Micron Technology, Inc. Quote
The Zacks Consensus Estimates project robust growth for Micron. For fiscal 2025, revenues are expected to grow by approximately 55% to $38.63 billion, while earnings are forecasted to increase more than eightfold to $9.32 per share. These optimistic projections have led to upward revisions in earnings per share estimates, reflecting positive sentiment around the stock.
Image Source: Zacks Investment Research
Final Thoughts: Buy the Dip
Micron’s steep decline presents a potentially attractive buying opportunity for investors who believe in the long-term growth story of the tech industry. The company’s vital role in AI, strong product portfolio and strategic partnerships make it a compelling investment.
With a Zacks Rank #2 (Buy) and a Growth Score of B, Micron appears to offer solid investment potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For those with a tech-focused portfolio, now might be a good time to consider adding Micron, as the company stands to benefit from the ongoing demand for high-performance memory and storage solutions.