Buyers concerned with Micron Know-how NASDAQ: MU ought to cheer the truth that its inventory tanked following the FQ1 2025 earnings report. The transfer is a knee-jerk response to blended outcomes and steerage that time to near-term weak point and long-term energy, pushed by its shift to AI.
Micron Know-how At this time
(As of 12/19/2024 05:45 PM ET)
- 52-Week Vary
- $78.63
▼
$157.54
- Dividend Yield
- 0.53%
- P/E Ratio
- 128.08
- Value Goal
- $133.56
The legacy enterprise stays an issue for Micron. The worldwide semiconductor stock reset is taking longer than anticipated attributable to finish markets, together with PCs. Nonetheless, it’s offset by energy in next-gen applied sciences: Micron’s superior knowledge middle and AI merchandise, together with its industry-leading HBM3E reminiscence chips. HBM reminiscence is crucial to AI due to the capability and velocity at which it operates. Micron’s HBM3E is the {industry}’s most superior, delivering considerably higher efficiency with decrease vitality use, good for knowledge facilities and AI consumption.
Micron Delivers Blended Outcomes and Weak Steering; Forecasts 35% Progress
Micron delivered blended outcomes and gave weak steerage for Q2, however let’s be honest. The corporate produced 84% year-over-year (YoY) income progress and a wider margin for document outcomes, outperformed on the underside line, and guided for an additional 35% YoY progress in Q2. The expansion is slowing sequentially and on a YoY foundation, however 35%, along with final yr’s 50% acquire, is strong, and the bar was set excessive. Analysts have been lifting their expectations all yr as AI demand and knowledge middle enterprise drove energy in peripheral markets reminiscent of reminiscence. Given the tendencies, Micron’s steerage is probably going cautious.
Micron Know-how MarketRank™ Inventory Evaluation
- General MarketRank™
- 99th Percentile
- Analyst Ranking
- Reasonable Purchase
- Upside/Draw back
- 53.4% Upside
- Quick Curiosity Stage
- Wholesome
- Dividend Energy
- Weak
- Environmental Rating
- -2.35
- Information Sentiment
- 0.54
- Insider Buying and selling
- Promoting Shares
- Proj. Earnings Progress
- 51.38%
Segmentally, DRAM gross sales grew by 20% sequentially and 86% yr over yr attributable to demand for HBM3 and supporting expertise. HBM gross sales greater than doubled, and SSD gross sales had been additionally robust. The corporate cites a market share acquire within the SSD section and forecasts further good points within the coming quarters.
Margin information is powerful. The corporate produced a 27.5% adjusted working margin, 50 foundation factors higher than MarketBeat’s reported consensus, up 500 foundation factors sequentially, reversing a loss posted within the earlier yr. The adjusted $1.79 is up considerably from final yr’s $0.95 loss and practically 200 foundation factors above forecasts. The takeaway is that Micron’s enterprise is sustaining earnings and bettering profitability, with strengths anticipated to proceed this yr, offering optimistic free money stream.
Micron Is Investing in Subsequent Gen Know-how and Progress
Micron’s steadiness sheet exhibits some adjustments, together with a YTD money discount. Nonetheless, the pink flags are offset by elevated spending on HBM applied sciences and ramping manufacturing to satisfy demand. The result’s that money is down, however the firm stays well-capitalized and is constructing worth for buyers. The steadiness sheet highlights embrace elevated receivables, present, and whole property solely partially offset by elevated legal responsibility. Property rose by $2.05 billion or about 3%, whereas liabilities elevated by lower than $0.5 billion or about 1.5%, leaving fairness up by 3.7%. Leverage stays low, with a complete legal responsibility of about 0.5x fairness, leaving the corporate in a strong monetary place able to executing its plans whereas paying its dividend.
The Analysts Are Underwhelmed by Micron’s Robust Quarter
The analyst’s response to Micron’s outcomes is blended. The majority of exercise is detrimental, together with quite a few value goal reductions and a downgrade to Maintain from Financial institution of America. Nonetheless, the chatter is optimistic, citing each near-term headwinds and an expectation for energy to enhance within the again half of subsequent yr when legacy enterprise reverts to progress. And never all the revisions are detrimental. Rosenblatt maintained its Purchase ranking and $250 value goal, anticipating a 150% inventory value enhance. The consensus sentiment for Micron is a Reasonable Purchase, and most analysts see it buying and selling above $110.
The inventory value pulled again by 12% in early pre-market buying and selling however might not have a lot deeper to maneuver. The inventory trades at a deep-value degree and above crucial help on the long-term shifting common. There’s a threat that Micron might fall under the $85 degree, however that isn’t anticipated as a result of low 11x earnings a number of, energy in outcomes, and long-term outlook for industry-leading outcomes pushed by HBM3 demand. The extra possible situation is that this market will regain traction shortly, confirming crucial help ranges because it rebounds from the post-release lows.
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