Surprisingly, Micron expertise(NASDAQ:MU) The inventory has had a disappointing inventory market efficiency in 2024. It has posted positive aspects of simply 20%, regardless of sturdy leads to current quarters that time to distinctive income and revenue progress for the corporate.
Shares of the reminiscence specialist are down 27% since hitting a 52-week excessive in mid-June. Nevertheless, it will not be stunning to see the inventory’s fortunes change after Micron reviews its first quarter fiscal 2025 outcomes on December 18.
Let’s examine why this can be the case.
Micron Expertise is understood for manufacturing reminiscence chips for computing and storage. This market is traditionally cyclical in naturebased mostly on the demand for private computer systems (PCs) and smartphones. That explains why the worldwide reminiscence market plunged practically 39% final yr, in line with Gartner estimates, because of a 4.4% drop in shipments of PCs, smartphones and tablets.
The decline in system shipments was extra pronounced in 2022, with a decline of 11.9%. Unsurprisingly, Micron’s monetary efficiency in 2022 and 2023 suffered in consequence.
Nevertheless, the reminiscence trade has seen a turnaround this yr. It’s pushed by catalysts corresponding to artificial intelligence (AI) which result in elevated reminiscence consumption in a number of areas, corresponding to information facilities, smartphones, and PCs. For instance, the usage of high-bandwidth reminiscence (HBM) in AI chips has elevated at an unbelievable price, as Nvidia have built-in one of these reminiscence to make their AI accelerators extra highly effective.
Nvidia’s newest Blackwell B200 GPU is provided with 192 gigabytes (GB) from HBM, which is an enormous enchancment over the earlier technology H100’s 96 GB and the H200’s 144 GB. This issue might assist Micron obtain higher outcomes than anticipated. Certainly, when Nvidia reported its newest quarterly outcomes final month, administration emphasised that Blackwell’s manufacturing ramp-up was occurring at a sooner tempo than anticipated.
Nvidia emphasizes that it’s on observe to “surpass our earlier Blackwell income estimate by a number of billion {dollars} as our provide visibility continues to extend.” That is excellent news for Micron, because the chipmaker has already provided its HBM chips to Nvidia. Blackwell’s stronger demand might assist it exceed market expectations. Catalysts like HBM additionally clarify why the worldwide reminiscence market is anticipated to generate $163 billion in income this yr, a big improve from final yr’s $92 billion.
Micron additionally appears well-positioned to offer spectacular steerage. Certainly, the scale of the reminiscence market is anticipated to succeed in $204 billion in 2025. HBM is in fact anticipated to play a central function within the progress of this market. Micron expects this particular sort of chip to generate $25 billion in income subsequent yr, up from $4 billion in 2023.
On the similar time, new catalysts corresponding to the brand new PC refresh cycle and the rising smartphone market might present a further enhance to Micron. IDC estimates that the worldwide PC market might develop 4.3% in 2025, following a flat efficiency this yr. On the similar time, world smartphone gross sales are anticipated to develop lower than 10% subsequent yr.
The mix of those components ought to be sure that the reminiscence market stays wholesome in 2025. This must be sufficient to assist Micron keep the spectacular progress momentum it has gained over the previous few quarters.
Analysts count on Micron’s income to leap 84% yr over yr to $8.71 billion within the first quarter of fiscal 2025. It’s anticipated to publish a revenue of $1.77 per share, in comparison with a lack of $0.95 per share in the identical quarter final yr. These numbers are effectively inside Micron’s steerage vary. We have already seen that stronger demand from corporations like Nvidia might assist Micron beat consensus expectations, which might ship the inventory hovering after its quarterly report.
On the similar time, Micron is anticipated to report distinctive income progress of 52% in fiscal 2025, to $38 billion, whereas earnings are anticipated to succeed in $8.78 per share, up from 1 .30 {dollars} per share for the earlier fiscal yr.
Lastly, Micron’s extremely low cost valuation means traders are at the moment getting an unbelievable deal on the inventory. The chipmaker trades at simply 12 occasions ahead earnings, and Yahoo! Finance factors out that its price-to-earnings-to-growth ratio (PEG ratio), based mostly on its estimated five-year earnings progress price, is simply 0.17.
A PEG ratio under 1 means a inventory is undervalued relative to the expansion it’s anticipated to generate. This makes Micron a blue-chip progress inventory that traders can think about shopping for, because it appears to be like poised to soar this month, in addition to subsequent yr.
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